As filed with the Securities and Exchange Commission on September 1, 2011
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BRASIL TELECOM
S.A.
(Exact name of registrant as specified in its charter)
BRASIL TELECOM COMPANY
(Translation of Registrant’s name into English)
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Federative Republic of Brazil
(State or other jurisdiction of
incorporation or organization)
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4813
(Primary Standard Industrial
Classification Code Number)
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Not Applicable
(I.R.S. Employer
Identification Number)
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Rua General Polidoro, No. 99, 5th floor/part – Botafogo
22280-004 Rio de Janeiro, RJ, Brazil
(55 21) 3131-1211
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
Puglisi & Associates
850 Library Avenue, Suite 204
P.O. Box 885
Newark, Delaware 19715
(302) 738-6680
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
Mark O. Bagnall, Esq. White & Case LLP
Southeast Financial Center, Suite 4900 200 South Biscayne Boulevard Miami, FL 33131-2352 (305) 371-2700
Approximate
date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
¨
If
applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
¨
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of
Securities to Be Registered
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Amount
to be
Registered(1)
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Proposed
Maximum
Offering Price
Per Share
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Proposed
Maximum
Aggregate
Offering Price(4)
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Amount of
Registration Fee
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Common shares, no par value, of Brasil Telecom S.A.(2)
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51,497,927
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US$5.69
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US$292,796,752
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US$33,993.70
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Preferred shares, no par value, of Brasil Telecom S.A.(3)
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268,220,438
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US$5.75
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US$1,540,947,021
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US$178,903.95
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(1)
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Calculated, in each case, based on the maximum number of shares of Brasil Telecom S.A., or Brasil Telecom, to be issued to (1) holders of American Depositary
Shares, or ADSs, of Tele Norte Leste Participações S.A., or TNL, each representing one preferred share of TNL, and (2) holders of common and preferred shares of TNL who are U.S. residents, in connection with the merger described
in the accompanying prospectus, assuming that none of the holders exercise their right of withdrawal in connection with the merger.
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(2)
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23,153,886 of these shares will initially be represented by ADSs of Brasil Telecom, each of which represents one common share, or Brasil Telecom Common ADSs, and which
may be evidenced by American Depositary Receipts, or ADRs, that will be issued in exchange for TNL ADSs. The remaining 28,344,041 common shares will not be represented by Brasil Telecom Common ADSs.
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(3)
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237,355,059 of these shares will initially be represented by ADSs of Brasil Telecom, each of which represents three preferred shares, or Brasil Telecom Preferred ADSs,
and which may be evidenced by ADRs that will be issued in exchange for TNL ADSs. The remaining 30,865,379 shares will not be represented by Brasil Telecom Preferred ADSs.
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(4)
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The Proposed Maximum Aggregate Offering Price (estimated solely for purposes of computing the amount of the registration fee pursuant to Rule 457(c) and Rule 457(f)
under the U.S. Securities Act of 1933, as amended) is calculated in accordance with the (1) the number of TNL common shares held directly by U.S. residents to be cancelled in the merger in exchange for common shares of Brasil Telecom and
US$13.00, the average of the high and low prices of the common shares of TNL as reported on the Brazilian Securities, Commodities and Futures Exchange (
BM&FBOVESPA S.A.—Bolsa de Valores Mercadorias e Futuros
, or the
“BM&FBOVESPA”) on August 26, 2011, converted into U.S. dollars based on an exchange rate of R$1.6114=US$1.00, the PTAX selling rate as reported by the Central Bank of Brazil (
Banco Central do Brasil
) on August 26, 2011,
(2) the exchange ratio of 2.1141 shares of Brasil Telecom (consisting of 0.1879 common shares and 1.9262 preferred shares) to be exchanged in the merger for each preferred share held directly by a U.S. resident of TNL that will be cancelled in
the merger, and US$11.96, the average of the high and low prices of the preferred shares of TNL as reported on BM&FBOVESPA on August 26, 2011, converted into U.S. dollars at the exchange rate described above, and (3) 2.1141 shares of Brasil
Telecom (consisting of 0.1879 common shares underlying Brasil Telecom Common ADSs and 1.9262 preferred shares underlying Brasil Telecom Preferred ADSs) to be exchanged in the merger for each of the TNL preferred shares that will be cancelled in the
merger underlying a TNL ADS, and US$12.17, the average of the high and low prices of the TNL ADSs as reported on the New York Stock Exchange on August 26, 2011.
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The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall
become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these
securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and is not soliciting an offer to buy these securities, in any jurisdiction where
such offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
PRELIMINARY PROSPECTUS (Subject to Completion)
Dated September 1, 2011
Brasil Telecom S.A.
51,497,927
Common Shares, including Common Shares in the form of American Depositary Shares
268,220,438 Preferred Shares, including Preferred Shares in the form of American Depositary Shares
Brasil Telecom S.A., or Brasil Telecom, and its indirect controlling shareholder Tele Norte Leste Participações S.A., or TNL, have proposed a merger (
incorporação
) under
Brazilian law of TNL with and into Brasil Telecom. Brasil Telecom provides a range of integrated telecommunications services in Region II of Brazil (which consists of the Federal District of Brazil and nine states of Brazil located in the western,
central and southern regions of Brazil). TNL is a holding company, which (1) controls Telemar Norte Leste S.A., or Telemar, which provides a range of integrated telecommunications services in Region I of Brazil (which consists of 16 states of
Brazil located in the northeastern and part of the northern and southeastern regions of Brazil), and (2) indirectly controls 49.3% of the total outstanding share capital of Brasil Telecom, including 79.6% of its outstanding voting share
capital.
If the merger is approved:
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direct holders of common shares of TNL will automatically receive, without any further action by those holders, 2.3122 common shares, no par value, of
Brasil Telecom for each common share they hold plus cash in lieu of any fractional Brasil Telecom common share;
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direct holders of preferred shares of TNL will automatically receive, without any further action by those holders, 0.1879 common shares and 1.9262
preferred shares, no par value, of Brasil Telecom for each TNL preferred share they hold plus cash in lieu of any fractional Brasil Telecom common share or preferred share; and
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holders of American Depositary Shares, or ADSs, of TNL (each representing one preferred share of TNL), or TNL ADSs, will receive, subject to the
procedures described herein, 0.1879 ADSs of Brasil Telecom (each representing one common share of Brasil Telecom), or Brasil Telecom Common ADSs, and 0.6420 ADSs of Brasil Telecom (each representing three preferred shares of Brasil Telecom), or
Brasil Telecom Preferred ADSs, for each TNL ADS they hold, plus cash in lieu of any fractional Brasil Telecom Common ADS or Brasil Telecom Preferred ADS.
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Approval of the merger will require (1) the affirmative vote of holders representing a majority of the total number of outstanding common shares of TNL, and (2) the affirmative vote of holders
representing a majority of the total number of outstanding common shares of Brasil Telecom, at duly convened extraordinary general shareholders’ meetings.
The extraordinary general shareholders’ meetings of TNL and Brasil Telecom to vote on the merger are scheduled to occur on
, 2011.
Telemar Participações S.A., or TmarPart, the direct controlling shareholder of TNL and the indirect controlling shareholder of
Brasil Telecom, has all of the voting power necessary to approve the merger without the support of any other holders of common shares of TNL or Brasil Telecom. TmarPart has informed TNL and Brasil Telecom that it intends to cause all common shares
held by its subsidiaries to be voted in favor of the merger
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Neither TNL nor Brasil Telecom is asking you for a proxy
and you are requested not to send TNL or Brasil Telecom a proxy.
The common shares and preferred shares of Brasil Telecom
are listed on the Brazilian Securities, Commodities and Futures Exchange (
BM&FBOVESPA S.A. — Bolsa de Valores Mercadorias e Futuros
), which we refer to as the BM&FBOVESPA, under the trading symbols “BRTO3” and
“BRTO4,” respectively. The Brasil Telecom Common ADSs and the Brasil Telecom Preferred ADSs are listed on the New York Stock Exchange, or the NYSE, under the trading symbols “BTM.C” and “BTM,” respectively. Upon the
completion of the merger we intend to change our name from Brasil Telecom S.A. to Oi S.A., to change the trading symbols for the common shares and preferred shares of Brasil Telecom to “OION3” and “OIPN4,” respectively, and to
change the trading symbols for the ADSs representing our common shares and preferred shares to “ ” and
“ ,” respectively. We will apply to list the Brasil Telecom Common ADSs and Brasil Telecom Preferred ADSs to be received by holders of TNL ADSs
on the NYSE and following the completion of the merger, the Brasil Telecom Common ADSs and Brasil Telecom Preferred ADSs are expected to trade under the symbols
“ ” and “ ,” respectively.
This prospectus has been prepared for holders of common shares and preferred shares of TNL residing in the United States and for holders
of TNL ADSs to provide information about the merger and the securities to be offered pursuant thereto.
You should read this
prospectus carefully. In particular, please read the section entitled “
Risk Factors
” beginning on page
43
for a discussion of risks that you should consider in evaluating the transaction described
in this prospectus.
Neither the United States Securities and Exchange Commission nor any state securities commission
has approved or disapproved of the securities to be issued in connection with the merger or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. This document does not constitute an offer
to sell or a solicitation of an offer to buy any securities in any jurisdiction where such an offer or solicitation would be illegal.
This prospectus is dated , 2011 and is expected to be mailed to shareholders of TNL on or about that date.
TABLE OF CO
NTENTS
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This prospectus includes important business and financial information about TNL and Brasil Telecom
that is not included in or delivered with this prospectus. This information is available without charge to security holders upon written or oral request. To obtain timely delivery, security holders must request the information no later than
, 2011, the fifth business days before the scheduled date of the extraordinary general shareholders’ meetings scheduled to approve the merger. See
“Incorporation by Reference.”
You should rely only on the information incorporated by reference or contained
in this prospectus. We have not authorized any person to provide you with any information or to make any representations in connection with the merger, other than the information contained or incorporated in this prospectus, and, if any person
provides you with other information or makes a representation in connection with the merger, that information or representation must not be relied on as having been authorized by us.
This prospectus does not constitute an offer to any person in any jurisdiction in which an offer is unlawful. The offer is not being
made to holders of shares in any jurisdiction in which the making or acceptance of the offer would not be in compliance with the laws of that jurisdiction. However, we may, in our sole discretion, take any action we may deem necessary to make the
offer in any such jurisdiction and extend the offer to holders of shares in any jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the offer to be made by a licensed broker or dealer, the offer will be deemed to
be made on our behalf by one or more registered brokers or dealers licensed under the laws of the relevant jurisdiction.
The delivery of this prospectus will not, under any circumstance, create an implication that our affairs have not changed since the
date as of which information is furnished or since the date of this prospectus.
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INCORPOR
ATION BY REFERENCE
The U.S. Securities and Exchange Commission, or the SEC, allows us to incorporate by reference information that we file with it into
this prospectus, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and certain later information that Brasil
Telecom or TNL file with the SEC will automatically update and supersede earlier information filed with the SEC or included in this prospectus. We incorporate by reference the following documents:
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Brasil Telecom’s annual report on Form 20-F/A for the fiscal year ended December 31, 2010, filed with the SEC on May 2, 2011 (File
No. 001-15256), which we refer to as the Brasil Telecom Annual Report;
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TNL’s annual report on Form 20-F for the fiscal year ended December 31, 2010, filed with the SEC on May 4, 2011 (File
No. 001-15256), which we refer to as the TNL Annual Report;
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any future annual reports on Form 20-F filed by Brasil Telecom or TNL with the SEC after the date of this prospectus and prior to the completion
of the merger;
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Brasil Telecom’s report on Form 6-K furnished to the SEC on September 1, 2011 (File No. 001-15256) containing (1) disclosure regarding
its financial condition and results of operations as of June 30, 2011 and for the six-month periods ended June 30, 2011 and 2010, and (2) its unaudited interim consolidated financial statements as of June 30, 2011 and for the
six-month periods ended June 30, 2011 and 2010, which we refer to as the Brasil Telecom First Half Report;
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TNL’s report on Form 6-K furnished to the SEC on September 1, 2011 (File No. 001-15256) containing (1) disclosure regarding its
financial condition and results of operations as of June 30, 2011 and for the six-month periods ended June 30, 2011 and 2010, and (2) its unaudited interim consolidated financial statements as of June 30, 2011 and for the
six-month periods ended June 30, 2011 and 2010, which we refer to as the TNL First Half Report;
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any future reports on Form 6-K that Brasil Telecom or TNL furnish to the SEC after the date of this prospectus and prior to the completion of the
merger that are identified in such reports as being incorporated by reference into this prospectus.
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We will
provide without charge to each person, including any beneficial owner, to whom a copy of this prospectus is delivered, upon written or oral request of any such person, a copy of (1) any and all of the documents referred to above which have been
or may be incorporated herein by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference in such documents), and (2) the Portuguese-language version of the Protocol of Merger and
Instrument of Justification (
Protocolo e Justificação de Incorporação
) between Brasil Telecom S.A. and Tele Norte Leste Participações S.A., which we refer to as the Merger Agreement, which includes
the Portuguese-language versions of the valuation reports described in “Part Five—The Merger—Presentations and Valuation Reports,” as well as English-language translations thereof prepared by Brasil Telecom. To request this
information, you should contact us at the following street address, telephone number or e-mail address:
Brasil Telecom S.A.
Rua Humberto de Campos, 425/8° andar-Leblon
22430-190 Rio de Janeiro, RJ, Brazil
Attention: IR Department
Telephone: +55-21-3131-1211
Facsimile: +55-21-3131-1383
email: invest@oi.net.br
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You may also contact the information agent for the merger:
105 Madison Avenue
New York, New York 10016
Calls within the United States: (800) 322-2885
(toll-free)
Calls outside the United States: (212) 929-5500 (collect)
Email: info@mackenziepartners.com
If you are a holder of TNL ADSs, you may also contact:
The Bank of New York
Mellon
101 Barclay Street
New York, NY 10286
Calls within the United States: (866) 300-4353
(toll-free)
Calls outside the United States: +1 (201) 680-6921 (collect)
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CERTAIN DEFINED TERMS AND
CONVENTIONS USED IN THIS PROSPECTUS
Currencies Used in this Prospectus
All references herein to “
real
,” “
reais
” or “R$” are to the Brazilian
real
, the official currency of Brazil. All references to “U.S. dollars,”
“dollars” or “US$” are to U.S. dollars.
On August 26, 2011, the exchange rate for
reais
into U.S.
dollars was R$1.611 to US$1.00, based on the selling rate as reported by the Central Bank of Brazil (
Banco Central do Brasil
), or the Central Bank. The selling rate was R$1.561 to US$1.00 on June 30, 2011, R$1.802 to US$1.00 on
June 30, 2010, R$1.666 to US$1.00 at December 31, 2010, R$1.741 to US$1.00 at December 31, 2009, and R$2.337 to US$1.00 at December 31, 2008, in each case, as reported by the Central Bank. The
real
/U.S. dollar exchange
rate fluctuates widely, and the selling rate at August 26, 2011 may not be indicative of future exchange rates. See “Part Two—Summary—Exchange Rates” for information regarding exchange rates for the
real
since
January 1, 2006.
Solely for the convenience of the reader, we have translated some amounts included in “Part
Two—Summary—Selected Historical Financial Data and Pro Forma Financial Data” from
reais
into U.S. dollars using the selling rate as reported by the Central Bank at June 30, 2011 of R$1.561 to US$1.00. These translations
should not be considered representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or at any other exchange rate.
Certain Defined Terms Used in this Prospectus
Unless otherwise indicated
or the context otherwise requires:
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all references to “our company,” “we,” “our,” “ours,” “us” or similar terms are to Brasil Telecom
S.A. and its consolidated subsidiaries;
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all references to “Brasil Telecom” are to Brasil Telecom S.A.;
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all references to “TNL” are to Tele Norte Leste Participações S.A., including its consolidated subsidiaries as the context
requires;
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all references to “Brazil” are to the Federative Republic of Brazil;
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all references to the “Brazilian government” are to the federal government of the Federative Republic of Brazil;
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all references to the “Brazilian Corporation Law” are to Brazilian Law No. 6,404/76, as amended; and
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all references to the “CVM” are to the Brazilian Securities Commission (
Comissão de Valores Mobiliários)
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Share Split
On April 10, 2007, Brasil Telecom authorized the reverse split of all of its issued common shares and preferred shares into one share for each 1,000 issued shares. This reverse share split became
effective on May 14, 2007. In connection with this reverse share split, Brasil Telecom authorized a change in the ratio of the Brasil Telecom ADSs. Upon the effectiveness of the reverse share split and the ratio change, the ratio of Brasil
Telecom preferred shares to Brasil Telecom ADSs changed from 3,000 preferred shares per ADS to three preferred shares per ADS. All references to numbers of Brasil Telecom shares and Brasil Telecom dividend amounts in this prospectus have been
adjusted to give effect to the 1,000-for-one reverse share split.
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Market Share and Other Information
We make statements in this prospectus about our market share and other information relating to the telecommunications industry in Brazil.
We have made these statements on the basis of information obtained from third-party sources and publicly available information that we believe are reliable, such as information and reports from the National Telecommunications Agency
(
Agência Nacional de Telecomunicações
), or ANATEL, the Brazilian federal telecommunications regulator, among others. Notwithstanding any investigation that we may have conducted with respect to the market share, market
size or similar data provided by third parties or derived from industry or general publications, we assume no responsibility for the accuracy or completeness of any such information.
Rounding
We have made rounding adjustments to reach some of the figures
included in this prospectus. As a result, numerical figures shown as totals in some tables may not be arithmetic aggregations of the figures that precede them.
vii
PART ONE—QUESTION
S AND ANSWERS ABOUT THE MERGER
The following are some questions that you may have regarding the merger and brief answers to those questions. Brasil
Telecom and TNL urge you to read carefully the remainder of this document because the information in this section does not provide all the information that might be important to you with respect to the merger. Additional important information is
also contained in the documents incorporated by reference into this prospectus. See “Incorporation by Reference.”
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The merger proposed by Brasil Telecom and TNL is a merger (
incorporação
) under Brazilian law of TNL with and into Brasil Telecom, with Brasil
Telecom as the surviving company. Pursuant to the proposed merger, each issued and then outstanding common share of TNL (other than any common shares held by shareholders who exercise their withdrawal rights with respect to their common shares) will
be converted automatically into 2.3122 common shares of Brasil Telecom without any further action by the holders thereof. Each issued and then outstanding preferred share of TNL (including preferred shares of TNL represented by the TNL ADSs) will be
converted automatically into 0.1879 common shares of Brasil Telecom and 1.9262 preferred shares of Brasil Telecom without any further action by the holders thereof. All TNL shares held in treasury prior to the merger will be cancelled and all issued
and then outstanding shares of Brasil Telecom held by TNL will be cancelled, other than 24,646,937 common shares of Brasil Telecom, which will be held in treasury by Brasil Telecom. As a result of the merger, TNL will cease to exist.
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What are the reasons for the merger?
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The merger is a step in the corporate reorganization that TNL, Telemar and Brasil Telecom are undertaking to simplify the corporate structure of these companies. The
corporate reorganization is expected to be accomplished through three transactions that will occur contemporaneously and will cumulatively result in the conversion of the publicly held shares of TNL and Telemar into shares of Brasil Telecom:
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a split-off (
cisão
) and merger of shares (
incorporação de ações
) under Brazilian law, or the split-off
and share exchange, in which (1) Telemar will transfer the shares of Coari Participações S.A., or Coari, a wholly owned subsidiary of Telemar, that Telemar owns to Coari, (2) Coari will assume a portion of the liabilities of
Telemar, which will become joint and several liabilities of Telemar and Coari, (3) the Telemar common and preferred shares (other than the shares of holders who exercise their withdrawal rights with respect to such shares) will be exchanged
automatically for newly issued common and preferred shares of Coari without any further action by the holders thereof, and (4) Coari will retain the Telemar shares exchanged for Coari shares and, as a result, Telemar will become a wholly-owned
subsidiary of Coari;
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a merger (
incorporação
) under Brazilian law of Coari with and into Brasil Telecom, with Brasil Telecom as the surviving company,
or the Coari merger; and
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The split-off and share exchange, the Coari merger and the merger, which we refer to collectively as the corporate reorganization, are
expected to be completed contemporaneously and each transaction is conditioned upon the approval and completion of the other transactions.
Neither Coari nor Brasil Telecom is offering the shares to be issued in the split-off and share exchange or
the Coari merger, as applicable, by means of this prospectus.
We believe that the corporate reorganization will:
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simplify the corporate structure of TNL, Telemar, Coari and Brasil Telecom, or the Oi Companies, which is currently extremely complex and includes
three publicly-held companies with seven different
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1
PART ONE—QUESTIONS AND ANSWERS ABOUT THE MERGER
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classes of publicly-traded shares, and simplify the corporate governance of the Oi Companies by consolidating the shareholder bases of the Oi Companies in one public company with two classes of
shares that will be traded in Brazil and abroad;
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reduce operational, administrative and financial costs following the consolidation of the general management of the Oi Companies, the simplification of
their capital structure, and the improvement of their ability to attract investments and access the capital markets;
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align the interests of the shareholders of the Oi Companies;
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enhance the liquidity of the shares of Brasil Telecom; and
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eliminate the costs of separate listings of the shares of TNL, Telemar and Brasil Telecom, as well as those costs arising from separately complying
with the public disclosure requirements applicable to TNL, Telemar and Brasil Telecom.
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Q:
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What will happen to my shares of TNL in the merger?
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A:
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If you are a direct holder of common shares of TNL and you do not seek to exercise your withdrawal rights (as described below), each of your common shares of TNL will
be converted into 2.3122 common shares of Brasil Telecom in the merger plus cash in lieu of any fractional Brasil Telecom common share to which you would have been entitled as a result of the merger.
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If you are a direct holder of preferred shares of TNL, each of your preferred shares of TNL will be converted into 0.1879 common shares of
Brasil Telecom and 1.9262 preferred shares of Brasil Telecom in the merger plus cash in lieu of any fractional Brasil Telecom common share or preferred share to which you would have been entitled as a result of the merger.
If you are a direct holder of common shares or preferred shares of TNL, no further action by you is required. An entry or entries will be
made in the share registry of Brasil Telecom to evidence the common shares and preferred shares of Brasil Telecom you will receive in the merger promptly after the merger is completed.
If you are a holder of TNL ADSs, you will receive 0.1879 Brasil Telecom Common ADSs, each representing one common share of Brasil Telecom,
and 0.6420 Brasil Telecom Preferred ADSs, each representing three preferred shares of Brasil Telecom, for each TNL ADS that you hold plus cash in lieu of any fractional ADSs.
If you are a registered holder of TNL ADSs, to receive your Brasil Telecom ADSs you must complete the letter of transmittal sent to you by The Bank of New York Mellon, as depositary for the TNL ADS
program, or the TNL Depositary, and comply with the procedures described in the letter of transmittal. If you hold TNL ADSs through a broker or other financial intermediary, no further action by you is required. The Brasil Telecom Common ADSs,
Brasil Telecom Preferred ADSs and any cash in lieu of fractional Brasil Telecom ADSs to which you would have been entitled as a result of the merger will automatically be credited to your account as promptly as practicable after the end of the
period during which the merger could be unwound as described below.
If you are a holder of Brasil Telecom common shares or
preferred shares or Brasil Telecom ADSs, you will continue to hold these securities after the merger.
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Q:
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Have the boards of directors or any committees of these boards taken any position relating to the merger?
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A:
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The board of directors of each of TNL and Brasil Telecom has approved the Merger Agreement to which TNL and Brasil Telecom are parties and the calling of the
extraordinary general shareholders’ meetings required to obtain the requisite shareholder approvals.
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2
PART ONE—QUESTIONS AND ANSWERS ABOUT THE MERGER
On June 28, 2011, each of TNL and Brasil Telecom,
complying with Guideline No. 35 (
Parecer de Orientação 35
) of the CVM, or Guideline 35, established, by one of the means recommended by the CVM, an independent special committee to analyze and negotiate the terms of the
merger between TNL and Brasil Telecom and to submit their recommendations to the respective boards of directors of TNL and Brasil Telecom. The purpose of setting up the independent special committees was to protect the interests of the
non-controlling shareholders of TNL and Brasil Telecom. These independent special committees, after having reviewed and negotiated the merger proposal, having received advice from their own independent financial advisors and legal counsel and after
having reached an agreement with the managements of TNL and Brasil Telecom on the terms of the merger, including the exchange ratios, unanimously recommended to the boards of directors of TNL and Brasil Telecom, respectively, the exchange ratio for
the merger.
On August 17, 2011, the boards of directors of TNL and Brasil Telecom considered the recommendation of the
independent special committees and other factors and approved the exchange ratios for the merger. On August 26, 2011, the boards of directors of TNL and Brasil Telecom approved the merger.
For additional information regarding the factors and reasons considered by the boards of directors of TNL and Brasil Telecom in approving
the merger, the manner in which these boards made their decision, see “Part Five: The Merger—Background of the Merger—Approval of the Merger.”
|
Q:
|
How were the exchange ratios calculated for the merger?
|
|
A:
|
The independent special committees of TNL and Brasil Telecom negotiated the exchange ratios and each submitted its recommendations to the relevant company’s board
of directors. The independent special committees based their recommendations to the boards of directors of TNL and Brasil Telecom on the various analyses provided by their respective financial advisors, with particular emphasis given to the weighted
average of the closing prices of the shares of TNL and Brasil Telecom on the BM&FBOVESPA during the 30 days preceding May 24, 2011, the date of the publication of the Relevant Fact (
Fato Relevante
) that first announced the corporate
reorganization. The exchange ratios take into consideration the proposed share dividend and redemption of Brasil Telecom. See “Part Five—The Merger—Background of the Merger—Corporate Reorganization—Share Dividend and
Redemption.” The boards of directors of Brasil Telecom and TNL believe that the exchange ratios are fair, in light of the fact that the exchange ratios were based on the analysis of and negotiations conducted by the independent special
committees of TNL and Brasil Telecom pursuant to Guideline 35, and that the shares of Brasil Telecom and TNL are liquid and that the valuation method used to determine the exchange ratios was the most appropriate.
|
Under Brazilian Law No. 6,404/76, as amended, which we refer to as the Brazilian Corporation Law, the number of our outstanding
non-voting shares may not exceed two-thirds of the total number of our outstanding shares. In order to maintain our compliance with this requirement after the merger, the exchange ratios recommended by the independent special committees of TNL and
Brasil Telecom were adjusted to reflect the proposed issuance of a portion of the consideration for the outstanding preferred shares of TNL in the form of Brasil Telecom common shares.
|
Q:
|
Will the share capital of Brasil Telecom be increased as a result of the merger?
|
|
A:
|
Yes. At the extraordinary general shareholders’ meeting of Brasil Telecom called to consider the merger, which will also consider the Coari merger, the holders of
common shares of Brasil Telecom will also vote to amend the bylaws of Brasil Telecom to increase its share capital to R$6,816,467,847.01 represented by 1,797,069,689 shares, consisting of 598,999,380 common shares and 1,198,070,309 preferred shares.
|
3
PART ONE—QUESTIONS AND ANSWERS ABOUT THE MERGER
|
Q:
|
Have any independent financial advisors provided a presentation or valuation report in connection with the merger?
|
|
A:
|
Yes. Apsis Consultoria Empresarial Ltda., or Apsis, has provided a valuation report regarding the net asset value of TNL based on the book value of its assets and
liabilities and a valuation report regarding the net worth of Brasil Telecom and TNL calculated at market prices. Banco Itaú BBA S.A., or Itaú BBA, has provided the independent special committee of Brasil Telecom with a presentation of
certain economic-financial analyses. Banco BTG Pactual S.A., or BTG Pactual, has provided the independent special committee of TNL with a report regarding certain valuation analyses. For summaries of these presentation and valuation reports see
“Part Five—The Merger—Presentations and Valuation Reports.” These presentation and valuation reports are included as exhibits 99.1 through 99.4 inclusive to the registration statement of which this prospectus forms a part.
|
As required by TNL’s bylaws, TNL will engage a financial advisor to provide TNL with a financial and
economic analysis regarding whether the corporate reorganization is equitable to all the companies involved in the corporate reorganization.
|
Q:
|
What shareholder approvals are needed for the merger?
|
|
A:
|
Approval of the merger will require (1) the affirmative vote of holders representing a majority of the total number of outstanding common shares of TNL, and
(2) the affirmative vote of holders representing a majority of the total number of outstanding common shares of Brasil Telecom, at duly convened extraordinary general shareholders’ meetings.
|
Approval of the increase in the share capital of Brasil Telecom will also require the affirmative vote of holders representing a majority
of the total number of outstanding common shares of Brasil Telecom present at a duly convened extraordinary general shareholder’s meeting.
We believe that the merger and the increase in the share capital of Brasil Telecom will be approved at the applicable extraordinary general shareholders’ meetings because:
|
|
•
|
|
our indirect controlling shareholder, TmarPart, which at the time of the extraordinary general shareholders’ meetings called to consider the
corporate reorganization will directly and indirectly hold 68.3% of the outstanding voting share capital of TNL, has represented to us that it will cause the shares of TNL that it holds to be voted in favor of the merger; and
|
|
|
•
|
|
TNL holds 98.0% of the outstanding voting share capital of Telemar, Telemar holds all of the outstanding voting share capital of Coari, Coari holds
79.6% of our outstanding voting share capital, and TmarPart has represented to us that it will cause Coari to vote the shares of Brasil Telecom that it holds in favor of the merger and the increase in the share capital of Brasil Telecom.
|
|
Q:
|
May I attend and vote at the extraordinary general shareholders’ meeting of TNL regarding the merger?
|
|
A:
|
If you hold common shares of TNL you may attend and vote at the TNL extraordinary general shareholders’ meeting held to consider the merger.
|
If you hold preferred shares of TNL, you are entitled to attend, but are not entitled to vote at, the TNL
extraordinary general shareholders’ meeting held to consider the merger.
If you hold TNL ADSs, you are not entitled to
attend the TNL extraordinary general shareholders’ meeting. If you hold TNL ADSs and wish to attend this meeting, you must surrender your TNL ADSs and receive delivery of the TNL preferred shares represented thereby in accordance with the terms
of the deposit agreement governing the TNL ADSs in sufficient time to allow your ownership of the TNL preferred shares to be reflected in the shareholder list that TNL will use to determine holders of preferred shares that are permitted to attend
the meeting, which generally reflects record ownership as of the fourth Brazilian business day prior to the meeting.
4
PART ONE—QUESTIONS AND ANSWERS ABOUT THE MERGER
|
Q:
|
When and where will the extraordinary general shareholders’ meetings regarding the merger take place?
|
|
A:
|
The TNL extraordinary general shareholders’ meeting is scheduled to take place
on , 2011 at (Rio de Janeiro time) at TNL’s
headquarters, located at Rua Humberto de Campos, 425/8° andar, Leblon 22430-190 Rio de Janeiro, RJ, Brazil.
|
The Brasil Telecom extraordinary general shareholders’ meeting is scheduled to take place
on , 2011 at (Brasília time) at Brasil
Telecom’s headquarters, located at Rua General Polidoro, 99/5° andar, Botafogo 22280-004 Rio de Janeiro, RJ, Brazil.
TNL and Brasil Telecom have the right to delay the date of these meetings.
|
Q:
|
Do I have withdrawal rights with respect to the merger?
|
|
A:
|
If you were the holder of record of common shares of TNL at the close of trading on May 24, 2011, the date of the Relevant Fact (
Fato Relevante
) that first
announced the merger, you may exercise withdrawal rights pursuant to Brazilian law and request that TNL purchase your TNL common shares.
You cannot exercise these withdrawal rights if you vote in favor of the merger.
If you have withdrawal
rights, your withdrawal rights will lapse 30 days after publication of the minutes of the extraordinary general shareholders’ meeting of TNL at which the merger is approved.
|
If you have withdrawal rights and exercise these rights, you will receive from TNL a cash amount equal to the net asset value of your TNL
common shares determined based on the book value of TNL’s assets and liabilities as of June 30, 2011. Based on this net asset value, the withdrawal value per TNL common share is R$18.02. See “Part Five—The Merger—Terms of the
Merger—Withdrawal Rights.”
If you hold TNL preferred shares (including TNL preferred shares represented by the TNL
ADSs), you are not entitled to withdrawal rights with respect to the merger.
|
Q:
|
Are there risks associated with the merger that I should consider in deciding whether to exercise my withdrawal rights?
|
|
A:
|
Yes. There are a number of risks related to the merger that are discussed in this prospectus. Please read in particular the detailed description of risks associated
with the merger on pages 43 through 68.
|
|
Q:
|
Why am I receiving this document?
|
|
A:
|
This document is a prospectus of Brasil Telecom relating to the common shares and preferred shares of Brasil Telecom (including the common shares of Brasil Telecom that
will be represented by Brasil Telecom Common ADSs and the preferred shares of Brasil Telecom that will be represented by Brasil Telecom Preferred ADSs) that the shareholders of TNL will receive as a result of the merger.
|
If you hold common shares or preferred shares of TNL (including preferred shares of TNL represented by TNL ADSs), you are receiving this
prospectus because Brasil Telecom may be deemed to be offering you its securities for purposes of the U.S. Securities Act of 1933, as amended, or the Securities Act.
|
Q:
|
What will be the accounting treatment of the corporate reorganization?
|
|
A:
|
TNL and Coari will account for the split-off and the share exchange based on the carry-over basis of the assets and liabilities of Telemar and the debt that will be
transferred from Telemar to Coari. As a result of this transaction, Telemar will become a wholly-owned subsidiary of Coari. This phase of the corporate restructuring will have no impact on the financial statements of Brasil Telecom.
|
In the current corporate structure, Coari is a holding company that controls Brasil Telecom. The Coari merger
will be a business combination of companies under common control. IFRS 3(R) does not apply to
5
PART ONE—QUESTIONS AND ANSWERS ABOUT THE MERGER
combinations of entities under common control. Furthermore, this transaction is not addressed under other IFRS guidance. Since these entities are under common control, Brasil Telecom will account
for the Coari merger using the carry-over basis of the assets received and liabilities assumed of Telemar and Coari, without any step-up in the basis of its own assets and liabilities. Consequently, effects of the purchase accounting recorded by
Coari relating to Coari’s acquisition of Brasil Telecom will not be “pushed down” to the assets and liabilities of Brasil Telecom in its consolidated financial statements as a result of this merger. Upon completion of this merger,
Telemar will become a wholly-owned subsidiary of Brasil Telecom and Coari will cease to exist.
Consistent with the accounting
for the Coari merger, since these entities are under common control, Brasil Telecom will account for the merger based on the carry-over basis of the individual assets received and liabilities assumed of TNL. The effects of the purchase accounting
relating to TNL’s acquisition of Brasil Telecom will not be “pushed down” to the assets and liabilities of Brasil Telecom in its consolidated financial statements as a result of the merger.
|
Q:
|
What are the U.S. federal income tax consequences of the merger?
|
|
A:
|
The exchange of common shares, preferred shares or ADSs of TNL solely for common shares, preferred shares or ADSs of Brasil Telecom generally will be nontaxable to TNL
shareholders for U.S. federal income tax purposes within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code. The exchange will be taxable, however, to a U.S. Holder (or a non-U.S. Holder, if gain arising
from the exchange is effectively connected to such non-U.S. Holder’s trade or business within the United States) if TNL were a passive foreign investment company, or PFIC, for any taxable year during which such U.S. Holder (or non-U.S. Holder)
held shares or ADSs of TNL.
|
Tax matters are very complicated. The tax consequences of the merger to you will
depend on your specific situation. You should consult your tax advisor for a full understanding of the U.S. federal, state, local and foreign tax consequences of the merger to you. See “Part Five—The Merger—Material
Considerations—U.S. Federal Income Tax Considerations—Tax Consequences to U.S. Holders if the Merger Qualifies as a Tax-Free Reorganization,” for a description of the tax consequences of the merger.
|
Q:
|
When will the merger be completed?
|
|
A:
|
The extraordinary general shareholders’ meetings of TNL and Brasil Telecom will be held
on , 2011, unless these meetings are postponed. The merger will be legally effective upon approval of the merger by the TNL extraordinary general
shareholders’ meeting and the Brasil Telecom extraordinary general shareholders’ meeting. However, Brasil Telecom common shares, preferred shares and ADSs will not be delivered to you, as applicable, in connection with the merger until
after the end of the period during which management of TNL is permitted pursuant to Brazilian law to unwind the merger, which period will end 40 days after publication of the minutes of the TNL extraordinary general shareholders’ meeting at
which the merger is approved. See “Could the merger be unwound?” below.
|
|
Q:
|
Can I sell my TNL shares and ADSs during the period for the exercise of withdrawal rights?
|
|
A:
|
During the period for the exercise of withdrawal rights, the common shares and preferred shares of TNL will continue to be listed on BM&FBOVESPA and be eligible for
trading over the BM&FBOVESPA under their existing ticker symbols, and the TNL ADSs will continue to be listed on the NYSE and be eligible for trading over the NYSE under their existing ticker symbol.
|
|
Q:
|
Could the merger be unwound?
|
|
A:
|
Under the Brazilian Corporation Law, if the management of TNL believes that the total value of the withdrawal rights exercised by its shareholders may
put at risk its financial stability, management may,
|
6
PART ONE—QUESTIONS AND ANSWERS ABOUT THE MERGER
|
|
within 10 days after the end of the withdrawal rights period, call an extraordinary general shareholders’ meeting of TNL to either unwind or ratify the merger. Payment relating to the
exercise of the withdrawal rights will not be due if the merger is unwound.
|
Because it directly holds a majority
of the voting shares of TNL, TmarPart would be able to cause the unwinding of the merger at such TNL extraordinary general shareholders’ meeting.
|
Q:
|
Are any other approvals from any governmental authorities or any third parties required in order to complete the merger?
|
|
A:
|
The merger will be subject to the consent of Brazil’s National Telecommunications Agency, or ANATEL.
|
|
Q:
|
After the merger, will I have the same ownership percentage that I now have?
|
|
A:
|
No. You will have a lower percentage ownership in Brasil Telecom than you currently have in TNL. Assuming that none of the shareholders of TNL, Telemar or Coari
exercises withdrawal rights with respect to any of the proposed transactions, (1) TmarPart and its wholly-owned subsidiary Valverde Participações S.A., or Valverde, will hold approximately 16.4% of the outstanding capital stock of
Brasil Telecom, (2) the shareholders of TmarPart, who currently do not owns any shares of Brasil Telecom, will hold approximately 26.6% of the outstanding capital stock of Brasil Telecom, (3) former shareholders of TNL, other than
TmarPart, Valverde and the shareholders of TmarPart, will hold approximately 32.0% of the outstanding capital stock of Brasil Telecom, (4) former shareholders of Telemar, other than TNL, TmarPart, Valverde and the shareholders of TmarPart, will
hold approximately 8.1% of the outstanding capital stock of Brasil Telecom, and (5) the percentage of the outstanding capital stock of Brasil Telecom held by non-controlling shareholders of Brasil Telecom prior to the merger, who currently own
approximately 50.6% of the outstanding capital stock of Brasil Telecom, will decrease to approximately 16.9%.
|
|
Q:
|
How will my rights as a shareholder of TNL change after the merger?
|
|
A:
|
Because your TNL common shares will be exchanged for Brasil Telecom common shares, and your TNL preferred shares will be exchanged for Brasil Telecom common shares and
preferred shares, you will become a Brasil Telecom shareholder and therefore will have the rights conferred by Brasil Telecom common shares and/or preferred shares.
|
Your rights as a holder of Brasil Telecom preferred shares will be substantially the same as your rights as a of TNL preferred shares, and
your rights as a holder of Brasil Telecom common shares will be substantially the same as your rights as a holder of TNL common shares. See “Part Six—Shareholder Rights.”
Under the Brazilian Corporation Law, the number of our outstanding non-voting shares may not exceed two-thirds of the total number of our
outstanding shares. In order to maintain our compliance with this requirement after the merger, we are issuing a portion of the consideration for the outstanding preferred shares of TNL in the form of Brasil Telecom common shares.
|
Q:
|
When will I receive my Brasil Telecom common shares, preferred shares or ADSs?
|
|
A:
|
Assuming the merger is completed, we will deliver common shares or preferred shares, as applicable, in connection with the merger after the end of the period during
which management of TNL is permitted pursuant to Brazilian law to unwind the merger, which period will end 40 days after publication of the minutes of the TNL extraordinary general shareholders’ meeting at which the merger is approved.
|
Assuming the merger is completed, the Brasil Telecom Common ADSs and Brasil Telecom Preferred ADSs representing
new common shares and preferred shares of Brasil Telecom, respectively, issued in connection with the merger will be made available as soon as practicable after the related common shares and preferred shares are deposited with the custodian of The
Bank of New York Mellon, as depositary for the Brasil
7
PART ONE—QUESTIONS AND ANSWERS ABOUT THE MERGER
Telecom ADS program, or the Brasil Telecom Depositary, in Brazil. This deposit is expected to occur after the end of the period during which management of TNL is permitted pursuant to Brazilian
law to unwind the merger, which period will end 40 days after publication of the minutes of the TNL extraordinary general shareholders’ meeting at which the merger is approved. Upon receipt of these related Brasil Telecom common shares and
preferred shares, the holders of TNL ADSs will be able to surrender such ADSs and receive delivery of Brasil Telecom ADSs, upon payment of the fees and expenses of the TNL Depositary and any applicable taxes.
|
Q:
|
When will I receive any cash attributable to any fractional Brasil Telecom security?
|
|
A:
|
If you hold common shares or preferred shares of TNL directly and the exchange ratio in the merger would entitle you to receive fractional common shares or preferred
shares of Brasil Telecom, Brasil Telecom will sell, in auctions on the BM&FBOVESPA, the aggregate of all fractional Brasil Telecom common shares and preferred shares. You will receive cash in lieu of any fractional Brasil Telecom share to which
you would have been entitled as a result of the merger based on the net proceeds (after deducting applicable fees and expenses, including sales commissions), from any sale on the BM&FBOVESPA of the aggregate number of fractional entitlements to
Brasil Telecom shares five business days after the sale of all such fractional interests by Brasil Telecom on the BM&FBOVESPA. The sale of such fractional interests in auctions on the BM&FBOVESPA will occur as soon as practicable after due
notice of the auctions are given in accordance with the rules of the BM&FBOVESPA, which will occur after the completion of the merger and the end of the withdrawal period and the period during which the merger could be unwound.
|
If you hold TNL ADSs and the exchange ratio would entitle you to receive a fraction of a Brasil Telecom Common
ADS or Brasil Telecom Preferred ADS, the TNL Depositary will try to sell on the open market the aggregate of those fractional Brasil Telecom ADSs. You will receive cash in lieu of any fractional Brasil Telecom Common ADS or Brasil Telecom Preferred
ADS you are entitled to receive based on the net proceeds (after deducting applicable fees, taxes and expenses, including sales commissions) from any sale on the NYSE of the aggregate number of fractional entitlements to Brasil Telecom ADSs.
Payments for interests in fractional Brasil Telecom ADSs will be available to registered holders as soon as practicable after the TNL Depositary completes sales of the aggregated fractional Brasil Telecom ADSs on the NYSE.
|
Q:
|
If I hold TNL ADSs, will I have to pay ADS cancellation and issuance fees?
|
|
A.
|
Yes. You will have to pay a fee of up to $0.05 per ADS to the TNL Depositary in connection with the cancellation of your TNL ADSs plus any expenses of the TNL
Depositary (including any fee charged by the Brasil Telecom Depositary for the issuance of Brasil Telecom ADSs) and any applicable taxes. In addition, you will have to pay any applicable stock transfer taxes with respect to the cancellation of your
TNL ADSs or the issuance of Brasil Telecom ADSs to you.
|
|
Q:
|
Will I have to pay brokerage commissions?
|
|
A:
|
You will not have to pay brokerage commissions if your common shares or preferred shares of TNL are registered in your name. If your common shares or preferred shares
of TNL are held through a bank or broker or a custodian linked to a stock exchange, you should consult with them as to whether or not they charge any transaction fee or service charges in connection with the merger.
|
|
Q:
|
After the merger will the Brasil Telecom shares and ADSs continue to trade under the current symbols?
|
|
A:
|
No. Upon the completion of the merger we intend to change our name from Brasil Telecom S.A. to Oi S.A., to change the trading symbols for the common shares and
preferred shares of Brasil Telecom to “OION3” and “OIPN4,” respectively, and to change the trading symbols for Brasil Telecom Common ADSs and Brasil Telecom Preferred ADSs to
“ ” and “ ,” respectively.
|
8
PART ONE—QUESTIONS AND ANSWERS ABOUT THE MERGER
|
Q:
|
What do I need to do now?
|
|
A:
|
If you hold common shares or preferred shares of TNL, you do not need to do anything to receive Brasil Telecom common shares and/or Brasil Telecom preferred shares, as
applicable, upon completion of the merger. The common shares and preferred shares of Brasil Telecom are book-entry shares, and an entry or entries will be made in the share registry of Brasil Telecom to evidence the common shares and/or preferred
shares you will receive.
|
If you hold TNL ADSs, the preferred shares underlying those ADSs will become common
shares and preferred shares of Brasil Telecom by operation of law. If you hold TNL ADSs indirectly through a broker or other intermediary, you will automatically receive new Brasil Telecom ADSs. However, if you hold TNL ADSs directly as a registered
holder, you must surrender your American Depositary Receipts, or ADRs, if any, representing TNL ADSs to the TNL Depositary in accordance with instructions that will be provided to you and pay the fees and expenses of the TNL Depositary and any
applicable taxes. Upon delivery to the TNL Depositary of the completed and signed letter of transmittal, together with those TNL ADRs and payment of the fees and expenses of the TNL Depositary and any applicable taxes, the TNL Depositary will
deliver the Brasil Telecom Common ADSs and Brasil Telecom Preferred ADSs to you. See “Part Five— The Merger—Terms of the Merger—Delivery of Brasil Telecom Shares and ADSs” for more details.
|
Q:
|
Who can help answer my questions?
|
|
A:
|
If you have any questions about the merger, you can contact:
|
Brasil Telecom S.A.
Rua Humberto de Campos, 425/8° andar-Leblon
2430-190 Rio de Janeiro, RJ, Brazil
Attention: IR Department
Telephone: +55-21-3131-1211
Facsimile: +55-21-3131-1383
email: invest@oi.net.br
You may also contact the information agent for the
merger:
105 Madison Avenue
New York, New York 10016
Calls within the United States: (800) 322-2885
(toll-free)
Calls outside the United States: (212) 929-5500 (collect)
Email: info@mackenziepartners.com
If you are a holder of TNL ADSs, you may also contact:
The Bank of New York Mellon
101 Barclay Street
New York, NY 10286
Calls within the United States: (866) 300-4353 (toll-free)
Calls outside the United States: +1 (201) 680-6921 (collect)
9
PART TWO—SUMMARY
The following summary highlights material information presented in greater detail elsewhere this prospectus and may not contain all
the information that may be important to you. You are urged to read carefully this entire prospectus in order to fully understand the merger. Most items in this summary include a page reference directing you to a more complete description of those
items.
The Companies
Each of Brasil Telecom and TNL is a corporation (
sociedade anônima
) organized under the laws of Brazil. Brasil Telecom is a
majority-owned subsidiary of Coari. Coari is a wholly-owned subsidiary of Telemar Norte Leste S.A., or Telemar. Telemar is a majority-owned subsidiary of TNL.
Overview of Brasil Telecom
We are the largest
integrated telecommunication service provider in Region II in Brazil, based on information regarding the total number of our fixed lines in service and mobile subscribers as of December 31, 2010 available from ANATEL. We offer a range of
integrated telecommunication services that includes fixed-line and mobile telecommunication services, data transmission services (including broadband access services), internet service provider, or ISP, services and other services, for residential
customers, small, medium and large companies, and governmental agencies.
According to the Brazilian Institute for Geography
and Statistics (
Instituto Brasileiro de Geografia e Estatística
), or IBGE, Region II had a population of approximately 44.4 million as of August 1, 2010, representing 23.9% of the total Brazilian population, and represented
approximately 27.0% of Brazil’s total gross domestic product, or GDP, for 2008 (the most recent period for which such information is currently available).
Fixed-Line Telecommunications and Data Transmission Services
Our
traditional fixed-line telecommunications business in Region II includes local and long-distance services, network usage services (interconnection) and public telephones, in accordance with the concessions and authorizations granted to us by ANATEL.
We are one of the largest fixed-line telecommunications companies in South America in terms of total number of lines in service as of December 31, 2010. We are the principal fixed-line telecommunication service provider in Region II, based on
our 7.0 million and 7.2 million fixed lines in service as of June 30, 2011 and December 31, 2010, respectively, with an estimated market share of 68.9% and 71.6% of the total fixed lines in service in this region as of
June 30, 2011 and December 31, 2010, respectively, based on information available from ANATEL.
We offer a variety
of high-speed data transmission services, including services offered by our subsidiaries BrT Serviços de Internet S.A. and Brasil Telecom Comunicação Multimídia Ltda. We also operate a fiber optic cable system that
connects the United States, Bermuda, Brazil, Venezuela and Colombia through our subsidiaries Brasil Telecom Cabos Submarinos Ltda., Brasil Telecom Subsea Cable System (Bermuda) Ltd., Brasil Telecom of America Inc. and Brasil Telecom de Venezuela
S.A. Our broadband services, primarily utilizing Asymmetric Digital Subscriber Line, or ADSL, technology, are marketed in Region II under the brand name “
Oi Velox
.” As of June 30, 2011 and December 31, 2010, we had
2.0 million and 1.9 million ADSL subscribers, respectively, representing 28.3% and 26.8% of our fixed lines in service, respectively.
Our fixed-line and data transmission services segment generated R$4,144 million and R$8,893 million in net operating revenue for the six-month period ended June 30, 2011 and the year ended
December 31, 2010, respectively, and recorded operating income before financial income (expenses) and taxes of R$977 million and R$2,481 million, respectively.
10
Mobile Telecommunication Services
We offer mobile telecommunication services in Region II through our subsidiary 14 Brasil Telecom Celular S.A., which we refer to as Brasil
Telecom Mobile. Based on our 8.1 million and 7.8 million mobile subscribers as of June 30, 2011 and December 31, 2010, respectively, we believe that we are one of the principal mobile telecommunication service providers in Region
II. Our estimated market share was 14.7% and 15.1% of the total number of mobile subscribers in Region II as of June 30, 2011 and December 31, 2010, respectively, based on information available from ANATEL.
Our mobile services segment generated R$937 million and R$1,937 million in net operating revenue for the six-month period ended
June 30, 2011 and the year ended December 31, 2010, respectively, and recorded operating losses before financial income (expenses) and taxes of R$24 million and R$34 million, respectively.
Other Services
We operate an internet portal through our subsidiary Internet Group do Brasil S.A. under the brand name “
iG
” that was one
of the largest internet portals in Brazil in terms of the number of unique visitors in 2010, based on information available from Ibope/NetRatings. We also operate a call center business for the sole purpose of providing services to our company and
our subsidiaries.
Our principal executive office is located at Rua General Polidoro, No. 99, 5th floor/part –
Botafogo, 22280-004 Rio de Janeiro, RJ, Brazil, and our telephone number at this address is (55-21) 3131-1211.
Overview of TNL
TNL is one of the largest integrated telecommunication service providers in Brazil, based on information regarding the total number of its fixed-lines in service and mobile subscribers as of
December 31, 2010 available from ANATEL, and the only telecommunication services provider offering “quadruple play” services in Brazil. TNL offers a range of integrated telecommunication services that includes fixed-line and mobile
telecommunication services, data transmission services (including broadband access services), ISP services and other services for residential customers, small, medium and large companies, and governmental agencies. TNL is the largest
telecommunications provider in both Region I and Region II in Brazil, based on revenues and customers as of and for the year ended December 31, 2010, based on information available from ANATEL and other publicly available information. TNL has
also been offering mobile telecommunication services in Region III (which consists of the State of São Paulo) since October 2008.
According to IBGE:
|
|
•
|
|
Region I had a population of approximately 101.4 million as of August 1, 2010, representing 54.6% of the total Brazilian population, and
represented approximately 39.7% of Brazil’s total gross domestic product, or GDP, for 2008.
|
|
|
•
|
|
Region II had a population of approximately 44.4 million as of August 1, 2010, representing 23.9% of the total Brazilian population, and
represented approximately 27.0% of Brazil’s total GDP for 2008.
|
|
|
•
|
|
Region III had a population of approximately 39.9 million as of August 1, 2010, representing 21.5% of the total Brazilian population, and
represented approximately 33.1% of Brazil’s total GDP for 2008.
|
11
Fixed-Line Telecommunications and Data Transmission Services
TNL’s traditional fixed-line telecommunications business in Regions I and II includes local and long-distance services, network usage
services (interconnection) and public telephones, in accordance with the concessions and authorizations granted to TNL and its subsidiaries, including Brasil Telecom, by ANATEL. TNL is one of the largest fixed-line telecommunications companies in
South America in terms of total number of lines in service as of December 31, 2010. TNL is the principal fixed-line telecommunication service provider in Region I and Region II, based on its 12.4 million and 12.8 million fixed lines
in service in Region I as of June 30, 2011 and December 31, 2010, respectively, and its 7.0 million and 7.2 million fixed lines in service in Region II as of June 30, 2011 and December 31, 2010, respectively. As of
June 30, 2011 and December 31, 2010, TNL had estimated market shares of 75.1% and 78.1% of the total fixed lines in service in Region I, respectively, and 68.9% and 71.6% of the total fixed lines in service in Region II, respectively,
based on information available from ANATEL.
TNL offers a variety of high-speed data transmission services in Regions I and
II. TNL’s broadband services, primarily utilizing ADSL technology, are marketed under the brand name “
Oi Velox
.” As of June 30, 2011 and December 31, 2010, TNL had 4.6 million and 4.3 million ADSL
subscribers, respectively, representing 23.7% and 21.5% of its fixed lines in service, respectively. Additionally, TNL provides voice and data services to corporate clients throughout Brazil.
TNL’s fixed-line services segment, which includes the results of Brasil Telecom’s fixed-line and data transmission services
segment, generated R$10,610 million and R$22,655 million in net operating revenue for the six-month period ended June 30, 2011 and the year ended December 31, 2010, respectively, and recorded operating income before financial income
(expenses) and taxes of R$704 million and R$2,173 million, respectively.
Mobile Telecommunication Services
TNL offers mobile telecommunication services throughout Brazil through its subsidiaries, including Brasil Telecom Mobile. Based on its
25.6 million and 24.3 million mobile subscribers in Region I as of June 30, 2011 and December 31, 2010, respectively, its 8.1 million and 7.8 million mobile subscribers in Region II as of those dates, respectively, and
its 7.9 million and 7.2 million mobile subscribers in Region III as of those dates, respectively, we believe that TNL is one of the principal mobile telecommunication service providers in each region. TNL’s estimated market share was
23.5% in Region I, 14.7% in Region II and 14.8% in Region III of the total number of mobile subscribers in these regions as of June 30, 2011, and 23.8% in Region I, 15.1% in Region II and 14.2% in Region III of the total number of mobile
subscribers in these regions as of December 31, 2010, based on information available from ANATEL.
TNL’s mobile
services segment, which includes the results of Brasil Telecom’s mobile services segment, generated R$5,079 million and R$10,001 million in net operating revenue for the six-month period ended June 30, 2011 and the year ended
December 31, 2010, respectively, and recorded operating income before financial income (expenses) and taxes of R$880 million and R$1,999 million, respectively.
Other Services
Through Brasil Telecom’s subsidiaries, TNL
operates a fiber optic cable system that connects the United States, Bermuda, Brazil, Venezuela and Colombia, and operates an internet portal under the brand name “
iG
” that was one of the largest internet portals in Brazil in terms
of the number of unique visitors in 2010, based on information available from Ibope/NetRatings.
12
In September 2008, ANATEL authorized TNL to provide subscription television services
throughout Brazil, using direct-to-home, or DTH, satellite technology. In 2009, TNL commenced offering DTH subscription television services to the low-income residential market in the states of Rio de Janeiro, Minas Gerais, Rio Grande do Sul,
Paraná and Santa Catarina. In 2010, TNL expanded this service to the Distrito Federal and the states of Bahia, Sergipe, Pernambuco, Ceará, Paraíba, Rio Grande do Norte, Alagoas, Espírito Santo and Goiás. In 2011,
TNL expanded this service to the states of Amazonas, Mato Grosso do Sul, Maranhão and Pará, and expects to offer this service to all states of Regions I and II by the end of 2011
Through its subsidiary WAY TV Belo Horizonte S.A., or WAY TV, TNL provides subscription television services and broadband internet access
to the residential, commercial and corporate market segments in the cities of Belo Horizonte, Poços de Caldas, Uberlândia and Barbacena in the State of Minas Gerais. WAY TV uses a hybrid network of fiber optic and bidirectional coaxial
cable (HFC) that allows it to offer a broad range of interactive services, such as distance learning, telephony and telemedicine, among others.
TNL’s principal executive office is located at Rua Humberto de Campos, 425/8° andar, Leblon 22430-190 Rio de Janeiro, RJ, Brazil, and its telephone number at this address is (55-21) 3131-1211.
The Corporate Reorganization
The merger is a step in the corporate reorganization that TNL, Telemar, Coari and Brasil Telecom are undertaking to simplify the
corporate structure of these companies. The corporate reorganization is expected to be accomplished through the following three transactions that will occur contemporaneously and will cumulatively result in the conversion of the publicly held shares
of TNL and Telemar into shares of Brasil Telecom. The split-off and share exchange, the Coari merger and the merger are expected to be completed contemporaneously and each transaction is conditioned upon the approval and completion of the other
transactions.
Neither Coari nor Brasil Telecom is offering the shares to be issued in the split-off and share exchange or the Coari merger, as applicable, by means of this prospectus.
Corporate Structure Prior to the Corporate Reorganization
We understand
that on the day prior to the general shareholders meetings of TNL, Telemar, Coari and Brasil Telecom called to consider the split-off and share exchange, the Coari merger and the merger, TmarPart intends to exchange all of the class A preferred
shares of Telemar that it owns for common shares of TNL held by three of its shareholders in order to ensure that upon the completion of the corporate reorganization, TmarPart will retain the voting control of Brasil Telecom in order to comply with
the legal and regulatory obligations of TmarPart to ANATEL.
13
The following chart sets forth the structure of TmarPart’s holdings in TNL,
Telemar, Coari and Brasil Telecom as it will exist following the exchange of TNL and Telemar shares between TmarPart and its shareholders. The percentages in bold italics represent the percentage of the voting capital owned by the parent company of
each entity, and the percentages not in bold italics represent the percentage of the total share capital owned by the parent company of each entity.
|
(1)
|
Ownership represents (1) 18.4% of the share capital of TNL, including 58.7% of its voting share capital, held directly by TmarPart, and (2) 3.8% of the share
capital of TNL, including 9.6% of its voting share capital, held by Valverde, a wholly-owned subsidiary of TmarPart.
|
14
The Split-Off and Share Exchange
The split-off and share exchange will be the first step in the proposed corporate reorganization. The boards of directors of each of Coari
and Telemar have approved a split-off under Brazilian law (
cisão
) and the share exchange in which:
|
|
•
|
|
Telemar will transfer the shares of Coari that it owns to Coari;
|
|
|
•
|
|
Coari will assume certain liabilities of Telemar under debt obligations of Telemar with an aggregate principal amount of R$16,086 million as of
June 30, 2011, including Telemar’s obligations under its outstanding 5.125% Senior Notes due 2017, 9.500% Senior Notes due 2019 and 5.500% Senior Notes due 2020, all of which will become joint and several liabilities of Telemar and Coari;
|
|
|
•
|
|
in exchange for the issued and outstanding shares of Telemar, Coari will issue without any further action by the holders thereof:
|
|
|
•
|
|
to the holder of each Telemar common share (excluding any common shares held by shareholders who have exercised their withdrawal rights in connection
with such common shares), one common share of Coari;
|
|
|
•
|
|
to the holder of each Telemar class A preferred share (excluding any class A preferred shares held by shareholders who have exercised their withdrawal
rights in connection with such class A preferred shares), one preferred share of Coari; and
|
|
|
•
|
|
to the holder of each Telemar class B preferred share (excluding any class B preferred shares held by shareholders who have exercised their withdrawal
rights in connection with such class B preferred shares), one preferred share of Coari; and
|
|
|
•
|
|
Telemar will become a wholly-owned subsidiary of Coari.
|
TNL and Coari will account for the split-off and the share exchange based on the carry-over basis of the assets and liabilities of Telemar and the debt that will be transferred from Telemar to Coari. As a
result of this transaction, Telemar will become a wholly-owned subsidiary of Coari. This phase of the corporate restructuring will have no impact on the financial statements of Brasil Telecom.
15
The following chart sets forth the structure of TmarPart’s holdings in TNL, Coari,
Telemar and Brasil Telecom immediately following the split-off and share exchange, assuming that no holders of Telemar shares exercise their withdrawal rights in connection with this transaction. The percentages in bold italics represent the
percentage of the voting capital owned by the parent company of each entity, and the percentages not in bold italics represent the percentage of the total share capital owned by the parent company of each entity.
|
(1)
|
Ownership represents (1) 18.4% of the share capital of TNL, including 58.7% of its voting share capital, held directly by TmarPart, and (2) 3.8% of the share
capital of TNL, including 9.6% of its voting share capital, held by Valverde, a wholly-owned subsidiary of TmarPart.
|
For more information regarding the split-off and share exchange, see “Part Five – The Merger—Background of the Merger—Corporate Reorganization—The Split-Off and Share
Exchange.”
The Coari Merger
The Coari merger will be the second step in the proposed corporate reorganization. The boards of directors of each of Brasil Telecom and Coari have approved the Coari merger, in which:
|
|
•
|
|
Coari will merge with and into Brasil Telecom, with Brasil Telecom as the surviving company;
|
|
|
•
|
|
all issued and then outstanding shares of Brasil Telecom held by Coari and all Coari shares held in treasury will be cancelled;
|
|
|
•
|
|
each issued and then outstanding common share of Coari (other than any common shares held by shareholders who exercise their withdrawal rights in
connection with such common shares) will be converted automatically into 5.1149 common shares of Brasil Telecom, plus cash in lieu of any fractional shares, without any further action by the holders thereof;
|
|
|
•
|
|
each issued and then outstanding preferred share of Coari (other than any preferred shares held by shareholders who exercise their withdrawal rights in
connection with such preferred shares) will be
|
16
|
|
converted automatically into 0.3904 common shares of Brasil Telecom and 4.0034 preferred shares of Brasil Telecom, plus cash in lieu of any fractional shares, without any further action by the
holders thereof;
|
|
|
•
|
|
Coari will cease to exist; and
|
|
|
•
|
|
Telemar will become a wholly-owned subsidiary of Brasil Telecom.
|
In the current corporate structure, Coari is a holding company that controls Brasil Telecom. The Coari merger will be a business
combination of companies under common control. IFRS 3(R) does not apply to combinations of entities under common control. Furthermore, this transaction is not addressed under other IFRS guidance. Since these entities are under common control, Brasil
Telecom will account for the Coari merger using the carry-over basis of the assets received and liabilities assumed of Telemar and Coari, without any step-up in the basis of its own assets and liabilities. Consequently, effects of the purchase
accounting recorded by Coari relating to Coari’s acquisition of Brasil Telecom will not be “pushed down” to the assets and liabilities of Brasil Telecom in its consolidated financial statements as a result of this merger. Upon
completion of this merger, Telemar will become a wholly-owned subsidiary of Brasil Telecom and Coari will cease to exist.
The
following chart sets forth the structure of TmarPart’s holdings in TNL, Brasil Telecom and Telemar immediately following the Coari merger, assuming that none of the shareholders of Telemar or Coari exercises withdrawal rights with respect to
any of the proposed transactions. The percentages in bold italics represent the percentage of the voting capital owned by the parent company of each entity, and the percentages not in bold italics represent the percentage of the total share capital
owned by the parent company of each entity.
|
(1)
|
Ownership represents (1) 18.4% of the share capital of TNL, including 58.7% of its voting share capital, held directly by TmarPart, and (2) 3.8% of the share
capital of TNL, including 9.6% of its voting share capital, held by Valverde, a wholly-owned subsidiary of TmarPart.
|
For more information regarding the Coari merger, see “Part Five – The Merger—Background of the Merger—Corporate Reorganization—The Coari Merger.”
17
The Merger
The merger will be the third step in the proposed corporate reorganization. The boards of directors of each of Brasil Telecom and TNL have
approved the merger, in which:
|
|
•
|
|
TNL will merge with and into Brasil Telecom, with Brasil Telecom as the surviving company;
|
|
|
•
|
|
all TNL shares held in treasury prior to the merger will be cancelled, and all issued and then outstanding shares of Brasil Telecom held by TNL will be
cancelled, other than 24,646,937 common shares of Brasil Telecom, which will be held in treasury by Brasil Telecom;
|
|
|
•
|
|
each issued and then outstanding common share of TNL (other than any common shares held by shareholders who exercise their withdrawal rights with
respect to such common shares) will be converted automatically into 2.3122 common shares of Brasil Telecom, plus cash in lieu of any fractional shares, without any further action by the holders thereof;
|
|
|
•
|
|
each issued and then outstanding preferred share of TNL (including preferred shares of TNL represented by the TNL ADSs) will be converted automatically
into 0.1879 common shares of Brasil Telecom and 1.9262 preferred shares of Brasil Telecom, plus cash in lieu of any fractional shares, without any further action by the holders thereof;
|
|
|
•
|
|
holders of TNL ADSs will receive, subject to the procedures described herein, 0.1879 Brasil Telecom Common ADSs and 0.6420 Brasil Telecom Preferred
ADSs for each TNL ADS they hold, plus cash in lieu of any fractional Brasil Telecom Common ADS or Brasil Telecom Preferred ADS; and
|
|
|
•
|
|
TNL will cease to exist.
|
The exchange ratios for the TNL preferred shares and ADSs are different because the ADS exchange ratio takes into account the difference in the ratio of ADSs to preferred shares under TNL’s ADS
program and our ADS program. Each TNL ADS represents one preferred share, while each Brasil Telecom Common ADS represents one common share and each Brasil Telecom Preferred ADS represents three preferred shares.
Consistent with the accounting for the Coari merger, since these entities are under common control Brasil Telecom will account for the
merger based on the carry-over basis of the individual assets received and liabilities assumed of TNL. The effects of the purchase accounting relating to TNL’s acquisition of Brasil Telecom will not be “pushed down” to the assets and
liabilities of Brasil Telecom in its consolidated financial statements as a result of the merger.
18
The following chart sets forth the structure of TmarPart’s holdings in Brasil
Telecom and Telemar immediately following the merger, assuming that none of the shareholders of TNL, Telemar or Coari exercises withdrawal rights with respect to any of the proposed transactions. The percentages in bold italics represent the
percentage of the voting capital owned by the parent company of each entity, and the percentages not in bold italics represent the percentage of the total share capital owned by the parent company of each entity.
|
(1)
|
Ownership represents (1) 14.1% of the share capital of Brasil Telecom, including 43.5% of its voting share capital, held directly by TmarPart, and (2) 2.3% of the share
capital of Brasil Telecom, including 7.1% of its voting share capital, held by Valverde, a wholly-owned subsidiary of TmarPart.
|
For more information regarding the merger, see “Part Five – The Merger.”
19
Timetable for the Merger
|
|
|
|
|
Event
|
|
Date
|
|
Meeting of the Boards of Directors of each of TNL and Brasil Telecom to approve the merger
|
|
August 26, 2011
|
|
Announcement of the terms of the merger
|
|
August 29, 2011
|
|
Notice of meeting of shareholders of each of TNL and Brasil Telecom to consider the merger published in
Valor
Econômico
and
Diário Oficial do Estado do Rio de Janeiro
|
|
, 2011
|
|
Mailing of prospectus to holders of TNL ADSs and U.S. holders of common and preferred shares of TNL
|
|
on or about , 2011
|
|
Meeting of shareholders of each of TNL and Brasil Telecom to approve the merger
|
|
, 2011
|
|
Beginning of period for exercise of withdrawal rights
|
|
on or about , 2011
|
|
End of period for withdrawal rights
|
|
on or about , 2011
|
|
Expected last day of trading of common and preferred shares of TNL on the BM&FBOVESPA and of TNL ADSs on the
NYSE
|
|
on or about , 2011
|
|
Expected first day of trading of newly issued Brasil Telecom common shares and preferred shares on the BM&FBOVESPA and newly
issued Brasil Telecom Common and Preferred ADSs on the NYSE
|
|
on or about , 2011
|
|
TNL Depositary expected to close books for all transfers involving TNL ADSs
|
|
on or about , 2011
|
|
Brasil Telecom Depositary begins to deliver Brasil Telecom ADSs upon surrender of TNL ADSs
|
|
on or about , 2011
|
20
S
elected Historical Financial Data and Pro Forma Financial
Data
Pres
entation of Financial Information
We and TNL maintain our books and records in
reais
and prepare our consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board, or IFRS.
Our
consolidated financial statements as of December 31, 2010 and 2009 and for the two years ended December 31, 2010, are incorporated into this prospectus by reference to the Brasil Telecom Annual Report, and have been audited, as stated in
the report appearing therein. Our unaudited consolidated interim financial information as of June 30, 2011 and for the six- month periods ended June 30, 2011 and 2010 is incorporated into this prospectus by reference to the Brasil Telecom
First Half Report.
TNL’s consolidated financial statements as of December 31, 2010 and 2009 and for the two years
ended December 31, 2010, are incorporated into this prospectus by reference to the TNL Annual Report, and have been audited, as stated in the reports appearing therein. TNL’s unaudited consolidated interim financial information as of
June 30, 2011 and for the six- month periods ended June 30, 2011 and 2010 is incorporated into this prospectus by reference to the TNL First Half Report.
The consolidated annual financial statements included in the Brasil Telecom Annual Report and the TNL Annual Report are the first annual consolidated financial statements of our company and TNL to be
prepared in accordance with IFRS. IFRS 1, “First-time Adoption of International Reporting Standards,” has been applied in preparing these consolidated annual financial statements, considering that the previous primary GAAP of our company
and TNL was Prior Brazilian GAAP, as described below, and that we and TNL have considered January 1, 2009 as the date of transition to IFRS. Reconciliations and descriptions of the effects of our transition
21
from Prior Brazilian GAAP to IFRS are included in note 3 to our consolidated annual financial statements, and reconciliations and descriptions of the effects of TNL’s transition from Prior
Brazilian GAAP to IFRS are included in note 3 to TNL’s consolidated annual financial statements.
Until December 31,
2009, we and TNL prepared our consolidated financial statements in accordance with accounting practices adopted in Brazil in effect on and prior to December 31, 2009, or Prior Brazilian GAAP, which were based on:
|
|
•
|
|
Brazilian Law No. 6,404/76, as amended by Brazilian Law No. 9,457/97, Brazilian Law No. 10,303/01, and Brazilian Law No. 11,638/07,
which we refer to collectively as the Brazilian Corporation Law;
|
|
|
•
|
|
the rules and regulations of the Brazilian Securities Commission (
Comissão de Valores Mobiliários
), or the CVM, the accounting
standards issued by the Brazilian Institute of Independent Accountants (
Instituto dos Auditores Independentes do Brasil
), or Ibracon, and the Brazilian Federal Accounting Council (
Conselho Federal de Contabilidade
), or CFC; and
|
|
|
•
|
|
the accounting standards issued by the Brazilian Accounting Standards Committee (
Comitê de Pronunciamentos Contábeis
), or the CPC,
and applicable on and prior to December 31, 2009.
|
In preparing the consolidated annual financial
statements of our company and TNL as of and for the two years ended December 31, 2010, we and TNL have restated the comparative figures in respect of 2009 to reflect the effects of the transition from Prior Brazilian GAAP to IFRS.
We and TNL also prepare individual financial statements in accordance with accounting practices adopted in Brazil, or Brazilian GAAP,
which include the pronouncements issued by the CPC applicable to dates and periods ended after December 31, 2009, for certain purposes, including for the calculation of dividends.
Selected Historical Financi
al Data
The
following information is provided to aid you in your analysis of the financial aspects of the merger. The following selected historical financial data has been derived from consolidated financial statements of our company and TNL.
Selected Historical Brasil
Telecom Financial Data
You should read the following selected financial data in conjunction with (1) our audited consolidated financial statements and the
related notes thereto, and “Item 5. Operating and Financial Review and Prospects” of the Brasil Telecom Annual Report, which are incorporated into this prospectus by reference to the Brasil Telecom Annual Report, and (2) the unaudited
interim consolidated financial statements of Brasil Telecom and the related notes thereto, and Brasil Telecom’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the First Half of 2011,”
which are incorporated into this prospectus by reference to the Brasil Telecom First Half Report.
The following selected
financial data have been derived from Brasil Telecom’s consolidated financial statements. The selected financial data as of and for the years ended December 31, 2010 and 2009 have been derived from our audited consolidated financial
statements, prepared in accordance with IFRS, which are incorporated into this prospectus by reference to the Brasil Telecom Annual Report. The selected financial data as of June 30, 2011 and for the six-month periods ended June 30, 2011
and 2010 have been derived from our unaudited interim consolidated financial statements, prepared in accordance with IFRS, which are incorporated into this prospectus by reference to the Brasil Telecom First Half Report. The results for the
six-month period ended June 30, 2011 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2011.
22
We have included information with respect to the dividends and/or interest attributable
to shareholders’ equity paid to holders of common shares and preferred shares of Brasil Telecom since January 1, 2006 in
reais
and in U.S. dollars translated from
reais
at the commercial market selling rate in effect as of
the payment date under the caption “Part Six—Shareholder Rights—Comparative Share and Dividend Information—Information About Historical Dividend Payments.” We prepare individual financial statements in accordance with
Brazilian GAAP for certain purposes, including for the calculation of dividends.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and For the Six-Month Period
Ended June 30,
|
|
|
As of and For the Year Ended
December 31,
|
|
|
|
|
2011(1)
|
|
|
2011
|
|
|
2010
|
|
|
2010(1)
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(in millions
of US$,
except per
share
amounts)
|
|
|
(in millions of
reais
, except
per share amounts and as
otherwise indicated)
|
|
|
(in millions
of US$,
except per
share
amounts)
|
|
|
(in millions of
reais
, except
per share amounts and as
otherwise indicated)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenue
|
|
US$
|
3,027
|
|
|
R$
|
4,726
|
|
|
R$
|
5,209
|
|
|
US$
|
6,574
|
|
|
R$
|
10,263
|
|
|
R$
|
10,919
|
|
|
Cost of sales and services
|
|
|
(1,444
|
)
|
|
|
(2,254
|
)
|
|
|
(2,425
|
)
|
|
|
(3,031
|
)
|
|
|
(4,732
|
)
|
|
|
(5,764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,583
|
|
|
|
2,472
|
|
|
|
2,784
|
|
|
|
3,543
|
|
|
|
5,531
|
|
|
|
5,155
|
|
|
Operating expenses
|
|
|
(975
|
)
|
|
|
(1,523
|
)
|
|
|
(1,663
|
)
|
|
|
(1,967
|
)
|
|
|
(3,072
|
)
|
|
|
(6,232
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) before financial income (expenses) and taxes
|
|
|
608
|
|
|
|
950
|
|
|
|
1,121
|
|
|
|
1,576
|
|
|
|
2,459
|
|
|
|
(1,077
|
)
|
|
Financial income
|
|
|
331
|
|
|
|
517
|
|
|
|
405
|
|
|
|
627
|
|
|
|
979
|
|
|
|
630
|
|
|
Financial expenses
|
|
|
(486
|
)
|
|
|
(759
|
)
|
|
|
(512
|
)
|
|
|
(679
|
)
|
|
|
(1,060
|
)
|
|
|
(912
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expenses, net
|
|
|
(155
|
)
|
|
|
(242
|
)
|
|
|
(107
|
)
|
|
|
(51
|
)
|
|
|
(80
|
)
|
|
|
(281
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes
|
|
|
453
|
|
|
|
708
|
|
|
|
1,014
|
|
|
|
1,524
|
|
|
|
2,379
|
|
|
|
(1,358
|
)
|
|
Income tax and social contribution
|
|
|
(154
|
)
|
|
|
(241
|
)
|
|
|
(289
|
)
|
|
|
(261
|
)
|
|
|
(408
|
)
|
|
|
339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
US$
|
299
|
|
|
R$
|
467
|
|
|
R$
|
725
|
|
|
US$
|
1,263
|
|
|
R$
|
1,971
|
|
|
R$
|
(1,019
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to controlling shareholders
|
|
US$
|
299
|
|
|
R$
|
467
|
|
|
R$
|
725
|
|
|
US$
|
1,263
|
|
|
R$
|
1,971
|
|
|
R$
|
(1,021
|
)
|
|
Net income (loss) attributable to non-controlling shareholders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
Net income (loss) applicable to each class of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
|
|
|
103
|
|
|
|
161
|
|
|
|
250
|
|
|
|
436
|
|
|
|
680
|
|
|
|
(1,021
|
)
|
|
Preferred shares
|
|
|
196
|
|
|
|
306
|
|
|
|
475
|
|
|
|
827
|
|
|
|
1,291
|
|
|
|
—
|
|
|
Net income (loss) per share(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares – basic
|
|
|
0.51
|
|
|
|
0.79
|
|
|
|
1.23
|
|
|
|
2.14
|
|
|
|
3.34
|
|
|
|
(1.85
|
)
|
|
Common shares – diluted
|
|
|
0.51
|
|
|
|
0.79
|
|
|
|
1.23
|
|
|
|
2.14
|
|
|
|
3.34
|
|
|
|
(1.85
|
)
|
|
Preferred shares and ADSs – basic
|
|
|
0.51
|
|
|
|
0.79
|
|
|
|
1.23
|
|
|
|
2.14
|
|
|
|
3.34
|
|
|
|
—
|
|
|
Preferred shares and ADSs – diluted
|
|
|
0.51
|
|
|
|
0.79
|
|
|
|
1.23
|
|
|
|
2.14
|
|
|
|
3.34
|
|
|
|
—
|
|
|
Weighted average shares outstanding (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares – basic
|
|
|
|
|
|
|
203,423
|
|
|
|
203,423
|
|
|
|
|
|
|
|
203,423
|
|
|
|
245,749
|
|
|
Common shares – diluted
|
|
|
|
|
|
|
203,423
|
|
|
|
203,423
|
|
|
|
|
|
|
|
203,423
|
|
|
|
245,749
|
|
|
Preferred shares – basic
|
|
|
|
|
|
|
386,366
|
|
|
|
386,366
|
|
|
|
|
|
|
|
386,366
|
|
|
|
305,439
|
|
|
Preferred shares – diluted
|
|
|
|
|
|
|
386,387
|
|
|
|
386,395
|
|
|
|
|
|
|
|
386,387
|
|
|
|
305,439
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and For the Six-Month
Period Ended June 30,
|
|
As of and For the Year Ended
December 31,
|
|
|
|
|
2011(1)
|
|
|
2011
|
|
|
2010
|
|
2010(1)
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(in millions
of US$,
except per
share
amounts)
|
|
|
(in millions of
reais
, except per
share amounts and
as otherwise
indicated)
|
|
(in millions
of US$,
except per
share
amounts)
|
|
|
(in millions of
reais
,
except per share amounts
and as otherwise
indicated)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
US$
|
1,155
|
|
|
R$
|
1,803
|
|
|
|
|
US$
|
2,061
|
|
|
R$
|
3,217
|
|
|
R$
|
1,717
|
|
|
Cash investments
|
|
|
507
|
|
|
|
791
|
|
|
|
|
|
533
|
|
|
|
832
|
|
|
|
382
|
|
|
Trade accounts receivable, net
|
|
|
1,266
|
|
|
|
1,977
|
|
|
|
|
|
1,326
|
|
|
|
2,070
|
|
|
|
1,992
|
|
|
Total current assets
|
|
|
4,588
|
|
|
|
7,162
|
|
|
|
|
|
5,437
|
|
|
|
8,487
|
|
|
|
6,127
|
|
|
Property, plant and equipment, net
|
|
|
3,482
|
|
|
|
5,435
|
|
|
|
|
|
3,406
|
|
|
|
5,317
|
|
|
|
5,267
|
|
|
Intangible assets, net
|
|
|
761
|
|
|
|
1,188
|
|
|
|
|
|
844
|
|
|
|
1,318
|
|
|
|
1,572
|
|
|
Total assets
|
|
|
16,655
|
|
|
|
26,000
|
|
|
|
|
|
17,222
|
|
|
|
26,886
|
|
|
|
24,564
|
|
|
Short-term loans and financing (including current portion of long-term debt)
|
|
|
666
|
|
|
|
1,039
|
|
|
|
|
|
669
|
|
|
|
1,044
|
|
|
|
870
|
|
|
Total current liabilities
|
|
|
4,758
|
|
|
|
7,428
|
|
|
|
|
|
4,286
|
|
|
|
6,691
|
|
|
|
5,424
|
|
|
Long-term loans and financing
|
|
|
1,720
|
|
|
|
2,685
|
|
|
|
|
|
2,127
|
|
|
|
3,321
|
|
|
|
3,573
|
|
|
Total equity
|
|
|
6,600
|
|
|
|
10,302
|
|
|
|
|
|
7,262
|
|
|
|
11,337
|
|
|
|
9,906
|
|
|
Shareholders’ equity attributable to controlling shareholders
|
|
|
6,600
|
|
|
|
10,302
|
|
|
|
|
|
7,262
|
|
|
|
11,337
|
|
|
|
9,905
|
|
|
Shareholders’ equity attributable to non-controlling shareholders
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
(1)
|
Translated for convenience only using the selling rate as reported by the Central Bank at June 30, 2011 for
reais
into U.S. dollars of R$1.561=US$1.00.
|
|
(2)
|
Under the Brazilian Corporation Law, preferred shareholders are not obligated to absorb losses, and such losses are exclusively attributed to common shareholders.
|
S
elected Historical TNL Financial Data
You should read the following selected financial data in conjunction with (1) TNL’s audited consolidated financial statements
and the related notes thereto, and “Item 5. Operating and Financial Review and Prospects” of the TNL Annual Report, which are incorporated into this prospectus by reference to the TNL Annual Report, and (2) the unaudited interim
consolidated financial statements of TNL and the related notes thereto, and TNL’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the First Half of 2011,” which are incorporated into
this prospectus by reference to the TNL First Half Report.
The following selected financial data have been derived from
TNL’s consolidated financial statements. The selected financial data as of and for the years ended December 31, 2010 and 2009 have been derived from TNL’s audited consolidated financial statements, prepared in accordance with IFRS,
which are incorporated into this prospectus by reference to the TNL Annual Report. The selected financial data as of June 30, 2011 and for the six-month periods ended June 30, 2011 and 2010 have been derived from TNL’s unaudited
interim consolidated financial statements, prepared in accordance with IFRS, which are incorporated into this prospectus by reference to the TNL First Half Report. The results for the six-month period ended June 30, 2011 are not necessarily
indicative of the results to be expected for the entire year ending December 31, 2011.
We have included information with
respect to the dividends and/or interest attributable to shareholders’ equity paid to holders of TNL’s common shares and preferred shares since January 1, 2006 in
reais
and in U.S.
24
dollars translated from
reais
at the commercial market selling rate in effect as of the payment date under the caption “Part Six—Shareholder Rights—Comparative Share and
Dividend Information—Information About Historical Dividend Payments.” TNL prepares individual financial statements in accordance with Brazilian GAAP for certain purposes, including for the calculation of dividends.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and For the Six-Month Period
Ended June 30,
|
|
|
As of and For the Year
Ended
December 31,
|
|
|
|
|
2011(1)
|
|
|
2011
|
|
|
2010
|
|
|
2010(1)
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(in millions
of US$,
except per
share
amounts)
|
|
|
(in millions of
reais
,
except per share amounts
and as otherwise
indicated)
|
|
|
(in millions of
US$, except
per share
amounts)
|
|
|
(in millions of
reais
, except
per share amounts and as
otherwise indicated)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenue
|
|
US$
|
8,974
|
|
|
R$
|
14,010
|
|
|
R$
|
14,836
|
|
|
US$
|
18,885
|
|
|
R$
|
29,479
|
|
|
R$
|
29,997
|
|
|
Cost of sales and services
|
|
|
(5,105
|
)
|
|
|
(7,969
|
)
|
|
|
(8,415
|
)
|
|
|
(10,659
|
)
|
|
|
(16,639
|
)
|
|
|
(18,458
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
3,869
|
|
|
|
6,040
|
|
|
|
6,420
|
|
|
|
8,225
|
|
|
|
12,840
|
|
|
|
11,539
|
|
|
Operating expenses
|
|
|
(2,864
|
)
|
|
|
(4,471
|
)
|
|
|
(4,284
|
)
|
|
|
(5,601
|
)
|
|
|
(8,743
|
)
|
|
|
(3,731
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income before financial income (expenses) and taxes
|
|
|
1,005
|
|
|
|
1,569
|
|
|
|
2,136
|
|
|
|
2,625
|
|
|
|
4,097
|
|
|
|
7,808
|
|
|
Financial income
|
|
|
608
|
|
|
|
949
|
|
|
|
884
|
|
|
|
1,236
|
|
|
|
1,929
|
|
|
|
1,601
|
|
|
Financial expenses
|
|
|
(1,561
|
)
|
|
|
(2,437
|
)
|
|
|
(2,017
|
)
|
|
|
(2,794
|
)
|
|
|
(4,361
|
)
|
|
|
(3,988
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income (expenses)
|
|
|
(954
|
)
|
|
|
(1,488
|
)
|
|
|
(1,133
|
)
|
|
|
(1,558
|
)
|
|
|
(2,432
|
)
|
|
|
(2,387
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
52
|
|
|
|
81
|
|
|
|
1,003
|
|
|
|
1,067
|
|
|
|
1,665
|
|
|
|
5,421
|
|
|
Income tax and social contribution
|
|
|
(79
|
)
|
|
|
(123
|
)
|
|
|
(75
|
)
|
|
|
54
|
|
|
|
84
|
|
|
|
(329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
US$
|
(27
|
)
|
|
R$
|
(42
|
)
|
|
R$
|
928
|
|
|
US$
|
1,120
|
|
|
R$
|
1,749
|
|
|
R$
|
5,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to controlling shareholders
|
|
US$
|
18
|
|
|
R$
|
28
|
|
|
R$
|
877
|
|
|
US$
|
915
|
|
|
R$
|
1,428
|
|
|
R$
|
4,274
|
|
|
Net income attributable to non-controlling shareholders
|
|
|
(45
|
)
|
|
|
(70
|
)
|
|
|
51
|
|
|
|
206
|
|
|
|
321
|
|
|
|
819
|
|
|
Gains (losses) on fair value of available-for-sale financial assets, net of taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3
|
|
|
Realization of losses on available-for-sale investments, net of taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
745
|
|
|
Hedge Accounting
|
|
|
(3
|
)
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Change in available-for-sale investment
|
|
|
(149
|
)
|
|
|
(233
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Comprehensive income
|
|
US$
|
(65
|
)
|
|
R$
|
(101
|
)
|
|
R$
|
928
|
|
|
US$
|
1,120
|
|
|
R$
|
1,749
|
|
|
R$
|
5,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to controlling shareholders applicable to each class of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
|
|
|
7
|
|
|
|
11
|
|
|
|
292
|
|
|
|
305
|
|
|
|
476
|
|
|
|
1,426
|
|
|
Preferred shares
|
|
|
11
|
|
|
|
17
|
|
|
|
585
|
|
|
|
610
|
|
|
|
952
|
|
|
|
2,848
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and For the Six-Month Period
Ended June 30,
|
|
|
As of and For the Year
Ended
December 31,
|
|
|
|
|
2011(1)
|
|
|
2011
|
|
|
2010
|
|
|
2010(1)
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(in millions
of US$,
except per
share
amounts)
|
|
|
(in millions of
reais
,
except per share
amounts and as
otherwise indicated)
|
|
|
(in millions
of US$,
except per
share
amounts)
|
|
|
(in millions of
reais
, except
per share amounts and as
otherwise indicated)
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares – basic
|
|
|
0.04
|
|
|
|
0.06
|
|
|
|
2.29
|
|
|
|
2.39
|
|
|
|
3.73
|
|
|
|
11.18
|
|
|
Common shares – diluted
|
|
|
0.04
|
|
|
|
0.06
|
|
|
|
2.23
|
|
|
|
2.35
|
|
|
|
3.67
|
|
|
|
11.01
|
|
|
Preferred shares and ADSs – basic
|
|
|
0.04
|
|
|
|
0.06
|
|
|
|
2.29
|
|
|
|
2.39
|
|
|
|
3.73
|
|
|
|
11.18
|
|
|
Preferred shares and ADSs – diluted
|
|
|
0.04
|
|
|
|
0.06
|
|
|
|
2.28
|
|
|
|
2.35
|
|
|
|
3.67
|
|
|
|
11.01
|
|
|
Weighted average shares outstanding (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares – basic
|
|
|
|
|
|
|
174,611
|
|
|
|
127,578
|
|
|
|
|
|
|
|
127,584
|
|
|
|
127,564
|
|
|
Common shares – diluted
|
|
|
|
|
|
|
178,537
|
|
|
|
130,855
|
|
|
|
|
|
|
|
131,466
|
|
|
|
131,381
|
|
|
Preferred shares – basic
|
|
|
|
|
|
|
278,731
|
|
|
|
254,975
|
|
|
|
|
|
|
|
255,009
|
|
|
|
254,841
|
|
|
Preferred shares – diluted
|
|
|
|
|
|
|
280,807
|
|
|
|
256,730
|
|
|
|
|
|
|
|
257,083
|
|
|
|
256,837
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
US$
|
4,566
|
|
|
R$
|
7,128
|
|
|
|
|
|
|
US$
|
5,798
|
|
|
R$
|
9,052
|
|
|
R$
|
6,206
|
|
|
Trade accounts receivable, net
|
|
|
3,747
|
|
|
|
5,850
|
|
|
|
|
|
|
|
3,776
|
|
|
|
5,894
|
|
|
|
5,942
|
|
|
Total current assets
|
|
|
12,726
|
|
|
|
19,867
|
|
|
|
|
|
|
|
14,203
|
|
|
|
22,172
|
|
|
|
18,318
|
|
|
Property, plant and equipment, net
|
|
|
14,709
|
|
|
|
22,962
|
|
|
|
|
|
|
|
14,957
|
|
|
|
23,349
|
|
|
|
25,296
|
|
|
Intangible assets, net
|
|
|
10,173
|
|
|
|
15,881
|
|
|
|
|
|
|
|
10,634
|
|
|
|
16,600
|
|
|
|
17,785
|
|
|
Total assets
|
|
|
47,324
|
|
|
|
73,873
|
|
|
|
|
|
|
|
48,131
|
|
|
|
75,137
|
|
|
|
74,002
|
|
|
Short-term loans and financing (including current portion of long-term loans and financing)
|
|
|
1,560
|
|
|
|
2,436
|
|
|
|
|
|
|
|
2,205
|
|
|
|
3,442
|
|
|
|
7,891
|
|
|
Short-term debentures (including current portion of debentures)
|
|
|
1,262
|
|
|
|
1,970
|
|
|
|
|
|
|
|
2,371
|
|
|
|
3,702
|
|
|
|
73
|
|
|
Total current liabilities
|
|
|
9,987
|
|
|
|
15,589
|
|
|
|
|
|
|
|
12,373
|
|
|
|
19,316
|
|
|
|
18,272
|
|
|
Long-term loans and financing
|
|
|
10,637
|
|
|
|
16,605
|
|
|
|
|
|
|
|
11,979
|
|
|
|
18,700
|
|
|
|
14,814
|
|
|
Long-term debentures
|
|
|
1,878
|
|
|
|
2,931
|
|
|
|
|
|
|
|
2,108
|
|
|
|
3,291
|
|
|
|
6,048
|
|
|
Total shareholders’ equity
|
|
|
15,926
|
|
|
|
24,860
|
|
|
|
|
|
|
|
12,795
|
|
|
|
19,974
|
|
|
|
20,111
|
|
|
Shareholders’ equity attributable to controlling shareholders
|
|
|
8,664
|
|
|
|
13,524
|
|
|
|
|
|
|
|
7,161
|
|
|
|
11,179
|
|
|
|
11,283
|
|
|
Shareholders’ equity attributable to non-controlling shareholders
|
|
|
7,262
|
|
|
|
11,336
|
|
|
|
|
|
|
|
5,634
|
|
|
|
8,795
|
|
|
|
8,828
|
|
|
(1)
|
Translated for convenience only using the selling rate as reported by the Central Bank at June 30, 2011 for
reais
into U.S. dollars of R$1.561=US$1.00.
|
26
U
naudited Pro Forma Financial Information
The unaudited pro forma financial information of Brasil Telecom presented herein has been derived from historical audited consolidated
financial statements of Brasil Telecom and TNL as of December 31, 2010 and for the year then ended, prepared in accordance with IFRS, which are incorporated by reference into this prospectus, and the historical unaudited interim consolidated
financial statements of Brasil Telecom and TNL as of June 30, 2011 and for the six-month period then ended, prepared in accordance with IFRS, which are incorporated by reference into this prospectus. As described in “Part Five: The
Merger—Background of the Merger,” the merger is a step in the corporate reorganization that TNL, Telemar, Coari and Brasil Telecom are undertaking to simplify the corporate structure of these companies.
The unaudited pro forma financial information was prepared as if: (1)(A) the split-off and share exchange, (B) the Coari
merger, and (C) the merger, as described in “Part Five: The Merger—Background of the Merger” had been completed on January 1, 2010 for purposes of the unaudited pro forma statements of operations for the year ended
December 31, 2010 and for the six-month period ended June 30, 2011, and (2)(A) these transactions, and (B) the share dividend and redemption described in “Part Five: The Merger—Background of the Merger—Corporate
Reorganization—Share Dividend and Redemption” had been completed on June 30, 2011 for purposes of the pro forma statement of financial position as of June 30, 2011. The pro forma assumptions and adjustments are described in the
accompanying notes presented below.
The unaudited pro forma financial information should be read in conjunction with the
accompanying notes presented below, the historical consolidated financial statements of Brasil Telecom and TNL as of and for the year ended December 31, 2010 and the notes thereto, which are incorporated into this prospectus by reference to the
Brasil Telecom Annual Report and the TNL Annual Report, respectively, and the historical unaudited interim consolidated financial statements of Brasil Telecom and TNL as of and for the six-month period ended June 30, 2011 and notes thereto,
which are incorporated into this prospectus by reference to the Brasil Telecom First Half Report and the TNL First Half Report, respectively.
The unaudited pro forma financial information is provided for illustrative purposes only and does not purport to represent, and you should not rely on the unaudited pro forma financial information as an
indication of, (1) what the actual consolidated results of operations or the consolidated financial position of Brasil Telecom would have been had the split-off and share exchange, the Coari merger and the merger occurred on the dates assumed,
or (2) Brasil Telecom’s future consolidated results of operations or financial position.
The unaudited pro forma
financial information does not reflect, for example, (1) any integration costs that may be incurred as a result of the split-off and share exchange, the Coari merger and the merger, (2) any synergies, operating efficiencies and cost
savings that may result from these transactions, (3) any benefits that may be derived from the combined company’s growth prospects, or (4) changes in rates for services or exchange rates subsequent to the dates of the unaudited pro
forma financial information. We have not completed the split-off and share exchange, the Coari merger or the merger. Accordingly, additional liabilities may be incurred in connection with the split-off and share exchange, the Coari merger and the
merger. Any additional liabilities and costs have not been reflected in the unaudited pro forma financial information because information necessary to reasonably estimate such costs is not yet available.
27
PART TWO—SUMMARY
Brasil Telecom S.A.
Unaudited Pro Forma Statement of Financial Position
As of June 30, 2011
(in millions of
reais
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brasil
Telecom
|
|
|
Share
Dividend and
Redemption
|
|
|
The Corporate
Reorganization
|
|
|
Brasil
Telecom
Pro-forma
|
|
|
|
|
|
|
|
(4)
|
|
|
(3)
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
R$
|
1,803
|
|
|
R$
|
(762
|
)
|
|
R$
|
5,325
|
|
|
R$
|
6,366
|
|
|
Cash investments
|
|
|
791
|
|
|
|
—
|
|
|
|
786
|
|
|
|
1,577
|
|
|
Derivative instruments
|
|
|
—
|
|
|
|
—
|
|
|
|
56
|
|
|
|
56
|
|
|
Trade receivables, net
|
|
|
1,977
|
|
|
|
—
|
|
|
|
3,873
|
|
|
|
5,850
|
|
|
Inventories, net
|
|
|
19
|
|
|
|
—
|
|
|
|
141
|
|
|
|
160
|
|
|
Current recoverable taxes
|
|
|
186
|
|
|
|
—
|
|
|
|
369
|
|
|
|
555
|
|
|
Other taxes
|
|
|
595
|
|
|
|
—
|
|
|
|
776
|
|
|
|
1,371
|
|
|
Judicial deposits
|
|
|
1,470
|
|
|
|
—
|
|
|
|
439
|
|
|
|
1,909
|
|
|
Other assets
|
|
|
321
|
|
|
|
—
|
|
|
|
940
|
|
|
|
1,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
7,162
|
|
|
|
(762
|
)
|
|
|
12,705
|
|
|
|
19,105
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash investments
|
|
|
13
|
|
|
|
—
|
|
|
|
53
|
|
|
|
66
|
|
|
Derivative instruments
|
|
|
—
|
|
|
|
—
|
|
|
|
29
|
|
|
|
29
|
|
|
Available-for-sale financial assets
|
|
|
—
|
|
|
|
—
|
|
|
|
1,025
|
|
|
|
1,025
|
|
|
Related parties
|
|
|
2,056
|
|
|
|
—
|
|
|
|
(2,056
|
)
|
|
|
—
|
|
|
Deferred taxes
|
|
|
5,216
|
|
|
|
—
|
|
|
|
3,022
|
|
|
|
8,238
|
|
|
Other taxes
|
|
|
172
|
|
|
|
—
|
|
|
|
346
|
|
|
|
518
|
|
|
Judicial deposits
|
|
|
4,606
|
|
|
|
—
|
|
|
|
2,523
|
|
|
|
7,129
|
|
|
Pension plan assets
|
|
|
99
|
|
|
|
—
|
|
|
|
—
|
|
|
|
99
|
|
|
Other assets
|
|
|
45
|
|
|
|
—
|
|
|
|
274
|
|
|
|
319
|
|
|
Investments
|
|
|
8
|
|
|
|
—
|
|
|
|
57
|
|
|
|
65
|
|
|
Property, plant and equipment, net
|
|
|
5,435
|
|
|
|
—
|
|
|
|
14,314
|
|
|
|
19,749
|
|
|
Intangible assets, net
|
|
|
1,188
|
|
|
|
—
|
|
|
|
2,281
|
|
|
|
3,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
18,838
|
|
|
|
—
|
|
|
|
21,868
|
|
|
|
40,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
R$
|
26,000
|
|
|
R$
|
(762
|
)
|
|
R$
|
34,573
|
|
|
R$
|
59,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the Unaudited Pro Forma Financial Information.
28
PART TWO—SUMMARY
Brasil Telecom S.A.
Unaudited Pro Forma Statement of Financial Position
As of June 30, 2011
(in millions of
reais
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brasil
Telecom
|
|
|
Share
Dividend and
Redemption
|
|
|
The Corporate
Reorganization
|
|
|
Brasil
Telecom
Pro-forma
|
|
|
|
|
|
|
|
(4)
|
|
|
(3)
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll, related taxes and benefits
|
|
R$
|
119
|
|
|
R$
|
—
|
|
|
R$
|
231
|
|
|
R$
|
350
|
|
|
Trade payables
|
|
|
1,474
|
|
|
|
—
|
|
|
|
2,151
|
|
|
|
3,625
|
|
|
Loans and financing
|
|
|
1,039
|
|
|
|
—
|
|
|
|
3,367
|
|
|
|
4,406
|
|
|
Derivative instruments
|
|
|
—
|
|
|
|
—
|
|
|
|
737
|
|
|
|
737
|
|
|
Current income taxes payable
|
|
|
97
|
|
|
|
—
|
|
|
|
242
|
|
|
|
339
|
|
|
Taxes other than income tax
|
|
|
1,160
|
|
|
|
—
|
|
|
|
656
|
|
|
|
1,816
|
|
|
Dividends and interest on capital
|
|
|
57
|
|
|
|
—
|
|
|
|
266
|
|
|
|
323
|
|
|
Licenses and concessions payable
|
|
|
115
|
|
|
|
—
|
|
|
|
274
|
|
|
|
389
|
|
|
Tax financing program
|
|
|
38
|
|
|
|
—
|
|
|
|
64
|
|
|
|
102
|
|
|
Provision for pension plan
|
|
|
47
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47
|
|
|
Provisions
|
|
|
1,267
|
|
|
|
—
|
|
|
|
480
|
|
|
|
1,747
|
|
|
Other payables
|
|
|
2,015
|
|
|
|
(762
|
)
|
|
|
(306
|
)
|
|
|
947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
7,428
|
|
|
|
(762
|
)
|
|
|
8,162
|
|
|
|
14,828
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing
|
|
|
2,685
|
|
|
|
—
|
|
|
|
16,850
|
|
|
|
19,535
|
|
|
Derivative instruments
|
|
|
—
|
|
|
|
—
|
|
|
|
386
|
|
|
|
386
|
|
|
Taxes other than income tax
|
|
|
556
|
|
|
|
—
|
|
|
|
999
|
|
|
|
1,555
|
|
|
Licenses and concessions payable
|
|
|
518
|
|
|
|
—
|
|
|
|
858
|
|
|
|
1,376
|
|
|
Tax financing program
|
|
|
413
|
|
|
|
—
|
|
|
|
692
|
|
|
|
1,105
|
|
|
Provision for pension plan
|
|
|
546
|
|
|
|
—
|
|
|
|
0
|
|
|
|
546
|
|
|
Provisions
|
|
|
3,210
|
|
|
|
—
|
|
|
|
1,991
|
|
|
|
5,201
|
|
|
Other payables
|
|
|
342
|
|
|
|
—
|
|
|
|
390
|
|
|
|
732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
8,270
|
|
|
|
—
|
|
|
|
22,166
|
|
|
|
30,436
|
|
|
Equity attributable to controlling shareholders
|
|
|
10,302
|
|
|
|
—
|
|
|
|
4,208
|
|
|
|
14,510
|
|
|
Equity attributable to non-controlling shareholders
|
|
|
—
|
|
|
|
—
|
|
|
|
37
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
10,302
|
|
|
|
—
|
|
|
|
4,245
|
|
|
|
14,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EQUITY AND LIABILITIES
|
|
R$
|
26,000
|
|
|
R$
|
(762
|
)
|
|
R$
|
34,573
|
|
|
R$
|
59,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the Unaudited Pro Forma Financial Information.
29
PART TWO—SUMMARY
Brasil Telecom S.A.
Unaudited Pro Forma Statement of Operations
For the year ended December 31, 2010
(in millions of
reais
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brasil
Telecom
|
|
|
The Corporate
Reorganization
|
|
|
Brasil Telecom
Pro-forma
|
|
|
|
|
|
|
|
(3)
|
|
|
|
|
|
Net operating revenue
|
|
R$
|
10,263
|
|
|
R$
|
19,216
|
|
|
R$
|
29,479
|
|
|
Cost of sales and services
|
|
|
(4,732
|
)
|
|
|
(8,884
|
)
|
|
|
(13,616
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
5,531
|
|
|
|
10,332
|
|
|
|
15,863
|
|
|
Operating income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
(1,025
|
)
|
|
|
(3,861
|
)
|
|
|
(4,886
|
)
|
|
General and administrative expenses
|
|
|
(1,539
|
)
|
|
|
(1,251
|
)
|
|
|
(2,790
|
)
|
|
Other operating income
|
|
|
524
|
|
|
|
808
|
|
|
|
1,332
|
|
|
Other operating expenses
|
|
|
(1,032
|
)
|
|
|
(1,320
|
)
|
|
|
(2,352
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income before financial income (expenses) and taxes
|
|
|
2,459
|
|
|
|
4,708
|
|
|
|
7,167
|
|
|
Financial income
|
|
|
980
|
|
|
|
950
|
|
|
|
1,930
|
|
|
Financial expenses
|
|
|
(1,060
|
)
|
|
|
(3,302
|
)
|
|
|
(4,362
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expenses, net
|
|
|
(80
|
)
|
|
|
(2,352
|
)
|
|
|
(2,432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
2,379
|
|
|
|
2,356
|
|
|
|
4,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax and social contribution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(149
|
)
|
|
|
(539
|
)
|
|
|
(688
|
)
|
|
Deferred
|
|
|
(259
|
)
|
|
|
(12
|
)
|
|
|
(271
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(408
|
)
|
|
|
(551
|
)
|
|
|
(959
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
R$
|
1,971
|
|
|
R$
|
1,805
|
|
|
R$
|
3,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to controlling shareholders
|
|
|
1,971
|
|
|
|
1,811
|
|
|
|
3,782
|
|
|
Net income attributed to non-controlling shareholders
|
|
|
—
|
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
Net income allocated to common shares – basic and diluted
|
|
|
680
|
|
|
|
|
|
|
|
1,235
|
|
|
Net income allocated to preferred shares – basic and diluted
|
|
|
1,291
|
|
|
|
|
|
|
|
2,547
|
|
|
Weighted average number of outstanding shares(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares – basic
|
|
|
203,423,176
|
|
|
|
|
|
|
|
574,352,443
|
|
|
Common shares – diluted
|
|
|
203,423,176
|
|
|
|
|
|
|
|
587,182,103
|
|
|
Preferred shares – basic
|
|
|
386,365,814
|
|
|
|
|
|
|
|
1,184,838,753
|
|
|
Preferred shares – diluted
|
|
|
386,387,781
|
|
|
|
|
|
|
|
1,189,304,887
|
|
|
Earnings per share – R$(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares – basic
|
|
|
3.34
|
|
|
|
|
|
|
|
2.15
|
|
|
Common shares – diluted
|
|
|
3.34
|
|
|
|
|
|
|
|
2.10
|
|
|
Preferred shares – basic
|
|
|
3.34
|
|
|
|
|
|
|
|
2.15
|
|
|
Preferred shares – diluted
|
|
|
3.34
|
|
|
|
|
|
|
|
2.14
|
|
See accompanying notes to the Unaudited Pro Forma Financial Information.
30
PART TWO—SUMMARY
Brasil Telecom S.A.
Unaudited Pro Forma Statement of Operations
For the interim period ended June 30, 2011
(in millions of
reais
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brasil
Telecom
|
|
|
The Corporate
Reorganization
|
|
|
Brasil
Telecom
Pro-forma
|
|
|
|
|
|
|
|
(3)
|
|
|
|
|
|
Net operating revenue
|
|
R$
|
4,726
|
|
|
|
R$9,284
|
|
|
R$
|
14,010
|
|
|
Cost of sales and services
|
|
|
(2,254
|
)
|
|
|
(4,473
|
)
|
|
|
(6,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
2,472
|
|
|
|
4,811
|
|
|
|
7,283
|
|
|
Operating income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
(587
|
)
|
|
|
(1,962
|
)
|
|
|
(2,549
|
)
|
|
General and administrative expenses
|
|
|
(709
|
)
|
|
|
(746
|
)
|
|
|
(1,455
|
)
|
|
Other operating income
|
|
|
287
|
|
|
|
383
|
|
|
|
670
|
|
|
Other operating expenses
|
|
|
(514
|
)
|
|
|
(619
|
)
|
|
|
(1,133
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income before financial income (expenses) and taxes
|
|
|
949
|
|
|
|
1,867
|
|
|
|
2,816
|
|
|
Financial income
|
|
|
517
|
|
|
|
432
|
|
|
|
950
|
|
|
Financial expenses
|
|
|
(759
|
)
|
|
|
(1,679
|
)
|
|
|
(2,438
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expenses, net
|
|
|
(241
|
)
|
|
|
(1,247
|
)
|
|
|
(1,488
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
708
|
|
|
|
620
|
|
|
|
1,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax and social contribution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(112
|
)
|
|
|
(234
|
)
|
|
|
(346
|
)
|
|
Deferred
|
|
|
(129
|
)
|
|
|
(72
|
)
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(241
|
)
|
|
|
(306
|
)
|
|
|
(547
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period
|
|
R$
|
467
|
|
|
R$
|
314
|
|
|
R$
|
780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to controlling shareholders
|
|
|
467
|
|
|
|
317
|
|
|
|
783
|
|
|
Net income attributed to non-controlling shareholders
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
Net income allocated to common shares – basic and diluted
|
|
|
161
|
|
|
|
|
|
|
|
256
|
|
|
Net income allocated to preferred shares – basic and diluted
|
|
|
306
|
|
|
|
|
|
|
|
527
|
|
|
Weighted average number of outstanding shares(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares – basic
|
|
|
203,423,176
|
|
|
|
|
|
|
|
574,352,443
|
|
|
Common shares – diluted
|
|
|
203,423,176
|
|
|
|
|
|
|
|
587,285,723
|
|
|
Preferred shares – basic
|
|
|
386,365,814
|
|
|
|
|
|
|
|
1,184,838,753
|
|
|
Preferred shares – diluted
|
|
|
386,387,781
|
|
|
|
|
|
|
|
1,189,307,990
|
|
|
Earnings per share – R$(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares – basic
|
|
|
0.79
|
|
|
|
|
|
|
|
0.44
|
|
|
Common shares –diluted
|
|
|
0.79
|
|
|
|
|
|
|
|
0.43
|
|
|
Preferred shares – basic
|
|
|
0.79
|
|
|
|
|
|
|
|
0.44
|
|
|
Preferred shares – diluted
|
|
|
0.79
|
|
|
|
|
|
|
|
0.44
|
|
See accompanying notes to the Unaudited Pro Forma Financial Information.
31
Notes to the Unaudited Pro Forma Financial Information
1. Basis of Presentation
The unaudited pro forma financial information of Brasil Telecom presented herein has been derived from the historical audited consolidated
financial statements of Brasil Telecom and TNL as of December 31, 2010 and for the year then ended and the historical unaudited interim consolidated financial statements of Brasil Telecom and TNL as of June 30, 2011 and the six month
period then ended prepared in accordance IFRS, which are incorporated by reference into this prospectus.
As described in
“Part Five: The Merger—Reasons for the Merger,” the split-off and share exchange, the Coari merger and the merger, which we refer to collectively as the corporate reorganization, are expected to be completed contemporaneously. Each
transaction is conditioned upon the approval and completion of the other transactions and will cumulatively result in the conversion of the publicly held shares of TNL and Telemar into shares of Brasil Telecom. In the current structure, TmarPart is
the direct controlling shareholder of TNL and the indirect controlling shareholder of Brasil Telecom and, after the corporate reorganization, will be the direct controlling shareholder of Brasil Telecom.
2. Accounting Treatment for the Corporate Reorganization
The Split-Off and the Share Exchange
For a description of the split-off
and the share exchange, see “Part Five: The Merger—Background of the Merger—Corporate Reorganization—The Split-Off and Share Exchange.”
TNL and Coari will account for the split-off and the share exchange based on the carry-over basis of the assets and liabilities of Telemar and the debt that will be transferred from Telemar to Coari. As a
result of this transaction, Telemar will become a wholly-owned subsidiary of Coari. This phase of the corporate restructuring will have no impact on the financial statements of Brasil Telecom.
The Coari Merger and the Merger
For a description of the Coari merger, see “Part Five: The Merger—Background of the Merger—Corporate Reorganization—The Coari Merger” and “Part Five: The Merger—Terms of
the Merger.”
In the current corporate structure, Coari is a holding company that controls Brasil Telecom, and TNL is a
holding company that controls Telemar, Coari and Brasil Telecom. The Coari merger and the merger will be business combinations of companies under common control. IFRS 3(R) does not apply to combinations of entities under common control. Furthermore,
this transaction is not addressed under other IFRS guidance. Since these entities are under common control, Brasil Telecom will account for the Coari Merger and the merger using the carry-over basis of the assets and liabilities of TNL, Telemar and
Coari, without any step-up in the basis of its own assets and liabilities. Consequently, the effects of the purchase accounting recorded by Coari relating to the acquisition of Brasil Telecom will not be “pushed down” to the assets and
liabilities of Brasil Telecom in its consolidated financial statements as a result of these mergers. Upon completion of these mergers, Telemar will become a wholly-owned subsidiary of Brasil Telecom and TNL and Coari will cease to exist.
32
3. The Corporate Reorganization Pro Forma Adjustments
As described above, these pro forma adjustments represent the carry-over basis of the assets, liabilities and results of operations of
TNL, Telemar and Coari.
The effects of the Coari merger and the merger have been presented as a single pro forma adjustment
since these transactions are expected to be completed contemporaneously and each transaction is conditioned upon the approval and completion of the other transaction. The following is a reconciliation of the impacts of the corporate reorganization
as presented in the unaudited pro forma financial information above to the historical consolidated balances of TNL for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TNL
As of June
30,
2011
|
|
|
Less: Brasil
Telecom as of
June 30, 2011
|
|
|
Less:
Purchase
price
allocation of
Brasil
Telecom
|
|
|
The Corporate
Reorganization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
R$7,128
|
|
|
R$
|
(1,803
|
)
|
|
R$
|
—
|
|
|
R$
|
5,325
|
|
|
Cash investments
|
|
|
1,577
|
|
|
|
(791
|
)
|
|
|
—
|
|
|
|
786
|
|
|
Derivative instruments
|
|
|
56
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56
|
|
|
Trade receivables, net
|
|
|
5,850
|
|
|
|
(1,977
|
)
|
|
|
—
|
|
|
|
3,873
|
|
|
Inventories, net
|
|
|
160
|
|
|
|
(19
|
)
|
|
|
—
|
|
|
|
141
|
|
|
Current recoverable taxes
|
|
|
555
|
|
|
|
(186
|
)
|
|
|
—
|
|
|
|
369
|
|
|
Other taxes
|
|
|
1,371
|
|
|
|
(595
|
)
|
|
|
—
|
|
|
|
776
|
|
|
Judicial deposits
|
|
|
1,909
|
|
|
|
(1,470
|
)
|
|
|
—
|
|
|
|
439
|
|
|
Other assets
|
|
|
1,261
|
|
|
|
(321
|
)
|
|
|
—
|
|
|
|
940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
19,867
|
|
|
|
(7,162
|
)
|
|
|
—
|
|
|
|
12,705
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash investments
|
|
|
66
|
|
|
|
(13
|
)
|
|
|
—
|
|
|
|
53
|
|
|
Derivative instruments
|
|
|
29
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29
|
|
|
Available-for-sale financial assets
|
|
|
1,025
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,025
|
|
|
Related parties
|
|
|
—
|
|
|
|
(2,056
|
)
|
|
|
—
|
|
|
|
(2,056
|
)
|
|
Deferred taxes
|
|
|
5,913
|
|
|
|
(5,216
|
)
|
|
|
2,325
|
|
|
|
3,022
|
|
|
Other taxes
|
|
|
518
|
|
|
|
(172
|
)
|
|
|
—
|
|
|
|
346
|
|
|
Judicial deposits
|
|
|
7,129
|
|
|
|
(4,606
|
)
|
|
|
—
|
|
|
|
2,523
|
|
|
Pension plan assets
|
|
|
99
|
|
|
|
(99
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Other assets
|
|
|
319
|
|
|
|
(45
|
)
|
|
|
—
|
|
|
|
274
|
|
|
Investments
|
|
|
65
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
57
|
|
|
Property, plant and equipment, net
|
|
|
22,962
|
|
|
|
(5,435
|
)
|
|
|
(3,213
|
)
|
|
|
14,314
|
|
|
Intangible assets, net
|
|
|
15,881
|
|
|
|
(1,188
|
)
|
|
|
(12,412
|
)
|
|
|
2,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
54,006
|
|
|
|
(18,838
|
)
|
|
|
(13,300
|
)
|
|
|
21,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
R$73,873
|
|
|
R$
|
(26,000
|
)
|
|
R$
|
(13,300
|
)
|
|
R$
|
34,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TNL
As of June 30,
2011
|
|
|
Less: Brasil
Telecom as of
June 30, 2011
|
|
|
Less: Purchase
price allocation
of Brasil
Telecom
|
|
|
The Corporate
Reorganization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll, related taxes and benefits
|
|
|
R$350
|
|
|
R$
|
(119
|
)
|
|
R$
|
—
|
|
|
R$
|
231
|
|
|
Trade payables
|
|
|
3,625
|
|
|
|
(1,474
|
)
|
|
|
—
|
|
|
|
2,151
|
|
|
Loans and financing
|
|
|
4,406
|
|
|
|
(1,039
|
)
|
|
|
—
|
|
|
|
3,367
|
|
|
Derivative instruments
|
|
|
737
|
|
|
|
—
|
|
|
|
—
|
|
|
|
737
|
|
|
Current income taxes payable
|
|
|
339
|
|
|
|
(97
|
)
|
|
|
—
|
|
|
|
242
|
|
|
Taxes other than income tax
|
|
|
1,816
|
|
|
|
(1,160
|
)
|
|
|
—
|
|
|
|
656
|
|
|
Dividends and interest on capital
|
|
|
323
|
|
|
|
(57
|
)
|
|
|
—
|
|
|
|
266
|
|
|
Licenses and concessions payable
|
|
|
389
|
|
|
|
(115
|
)
|
|
|
—
|
|
|
|
274
|
|
|
Tax financing program
|
|
|
102
|
|
|
|
(38
|
)
|
|
|
—
|
|
|
|
64
|
|
|
Provision for pension plan
|
|
|
47
|
|
|
|
(47
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Provisions
|
|
|
1,747
|
|
|
|
(1,267
|
)
|
|
|
—
|
|
|
|
480
|
|
|
Other payables
|
|
|
1,709
|
|
|
|
(2,015
|
)
|
|
|
—
|
|
|
|
(306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
15,590
|
|
|
|
(7,428
|
)
|
|
|
—
|
|
|
|
8,162
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing
|
|
|
19,535
|
|
|
|
(2,685
|
)
|
|
|
—
|
|
|
|
16,850
|
|
|
Derivative instruments
|
|
|
386
|
|
|
|
—
|
|
|
|
—
|
|
|
|
386
|
|
|
Deferred tax
|
|
|
2,987
|
|
|
|
—
|
|
|
|
(2,987
|
)
|
|
|
—
|
|
|
Taxes other than income tax
|
|
|
1,555
|
|
|
|
(556
|
)
|
|
|
—
|
|
|
|
999
|
|
|
Licenses and concessions payable
|
|
|
1,376
|
|
|
|
(518
|
)
|
|
|
—
|
|
|
|
858
|
|
|
Tax financing program
|
|
|
1,105
|
|
|
|
(413
|
)
|
|
|
—
|
|
|
|
692
|
|
|
Provision for pension plan
|
|
|
546
|
|
|
|
(546
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Provisions
|
|
|
5,201
|
|
|
|
(3,210
|
)
|
|
|
—
|
|
|
|
1,991
|
|
|
Other payables
|
|
|
732
|
|
|
|
(342
|
)
|
|
|
—
|
|
|
|
390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
33,423
|
|
|
|
(8,270
|
)
|
|
|
(2,987
|
)
|
|
|
22,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
24,860
|
|
|
|
(10,302
|
)
|
|
|
(10,313
|
)
|
|
|
4,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EQUITY AND LIABILITIES
|
|
|
R$73,873
|
|
|
(R$
|
26,000
|
)
|
|
(R$
|
13,300
|
)
|
|
R$
|
34,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TNL for the
year ended
December 31,
2010
|
|
|
Less: Brasil
Telecom for
the year ended
December
31,
2010
|
|
|
Less:
Amortization
of purchase
price
allocation of
Brasil
Telecom
|
|
|
The Corporate
Reorganization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
Net operating revenue
|
|
R$
|
29,479
|
|
|
R$
|
(10,263
|
)
|
|
R$
|
—
|
|
|
R$
|
19,216
|
|
|
Cost of sales and services
|
|
|
(16,638
|
)
|
|
|
4,732
|
|
|
|
3,022
|
|
|
|
(8,884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
12,841
|
|
|
|
(5,531
|
)
|
|
|
3,022
|
|
|
|
10,332
|
|
|
Operating income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
(4,886
|
)
|
|
|
1,025
|
|
|
|
—
|
|
|
|
(3,861
|
)
|
|
General and administrative expenses
|
|
|
(2,790
|
)
|
|
|
1,539
|
|
|
|
—
|
|
|
|
(1,251
|
)
|
|
Other operating income
|
|
|
1,332
|
|
|
|
(524
|
)
|
|
|
—
|
|
|
|
808
|
|
|
Other operating expenses
|
|
|
(2,400
|
)
|
|
|
1,032
|
|
|
|
48
|
|
|
|
(1,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income before financial income (expenses) and taxes
|
|
|
4,097
|
|
|
|
(2,459
|
)
|
|
|
3,070
|
|
|
|
4,708
|
|
|
Financial income
|
|
|
1,930
|
|
|
|
(980
|
)
|
|
|
—
|
|
|
|
950
|
|
|
Financial expenses
|
|
|
(4,362
|
)
|
|
|
1,060
|
|
|
|
—
|
|
|
|
(3,302
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expenses, net
|
|
|
(2,432
|
)
|
|
|
80
|
|
|
|
—
|
|
|
|
(2,352
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
1,665
|
|
|
|
(2,379
|
)
|
|
|
3,070
|
|
|
|
2,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax and social contribution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(688
|
)
|
|
|
149
|
|
|
|
—
|
|
|
|
(539
|
)
|
|
Deferred
|
|
|
773
|
|
|
|
259
|
|
|
|
(1,044
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
|
|
|
|
408
|
|
|
|
(1,044
|
)
|
|
|
(551
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year
|
|
R$
|
1,750
|
|
|
R$
|
(1,971
|
)
|
|
R$
|
2,026
|
|
|
R$
|
1,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TNL for the
six-month
period ended
June 30, 2011
|
|
|
Less: Brasil
Telecom for
the six-month
period ended
June 30,
2011
|
|
|
Less:
Amortization
of purchase
price
allocation of
Brasil
Telecom
|
|
|
The Corporate
Reorganization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
Net operating revenue
|
|
R$
|
14,010
|
|
|
R$
|
(4,726
|
)
|
|
R$
|
—
|
|
|
R$
|
9,284
|
|
|
Cost of sales and services
|
|
|
(7,970
|
)
|
|
|
2,254
|
|
|
|
1,243
|
|
|
|
(4,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
6,040
|
|
|
|
(2,472
|
)
|
|
|
1,243
|
|
|
|
4,811
|
|
|
Operating income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
(2,549
|
)
|
|
|
587
|
|
|
|
—
|
|
|
|
(1,962
|
)
|
|
General and administrative expenses
|
|
|
(1,455
|
)
|
|
|
709
|
|
|
|
—
|
|
|
|
(746
|
)
|
|
Other operating income
|
|
|
670
|
|
|
|
(287
|
)
|
|
|
—
|
|
|
|
383
|
|
|
Other operating expenses
|
|
|
(1,137
|
)
|
|
|
514
|
|
|
|
4
|
|
|
|
(619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income before financial income (expenses) and taxes
|
|
|
1,569
|
|
|
|
(949
|
)
|
|
|
1,247
|
|
|
|
1,867
|
|
|
Financial income
|
|
|
949
|
|
|
|
(517
|
)
|
|
|
—
|
|
|
|
432
|
|
|
Financial expenses
|
|
|
(2,438
|
)
|
|
|
759
|
|
|
|
—
|
|
|
|
(1,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expenses, net
|
|
|
(1,488
|
)
|
|
|
241
|
|
|
|
—
|
|
|
|
(1,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
81
|
|
|
|
(708
|
)
|
|
|
1,247
|
|
|
|
620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax and social contribution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(346
|
)
|
|
|
112
|
|
|
|
—
|
|
|
|
(234
|
)
|
|
Deferred
|
|
|
223
|
|
|
|
129
|
|
|
|
(424
|
)
|
|
|
(72
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(123
|
)
|
|
|
241
|
|
|
|
(424
|
)
|
|
|
(306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period
|
|
R$
|
(42
|
)
|
|
R$
|
(467
|
)
|
|
R$
|
823
|
|
|
R$
|
314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
4. Share Dividend and Redemption Adjustment
As described in “Part Five: The Merger—Background of the Merger—Corporate Reorganization—Share Dividend and
Redemption,” prior to completing the corporate reorganization, Brasil Telecom will issue newly created redeemable preferred shares to all of its shareholders and simultaneously redeem these shares for cash. In connection with this redemption,
Brasil Telecom expects to pay approximately R$1,502, distributed pro-ratably among all of its shareholders. As of June 30, 2011, Brasil Telecom recorded a payable for this amount in its historical financial statements. The pro forma adjustment
as of June 30, 2011 represents the cash payment of R$762 to the non-controlling shareholders of Brasil Telecom since this cash will not remain within Brasil Telecom as a result of the Coari merger.
5. Earnings per share
The pro forma basic weighted average number of outstanding shares was estimated considering the shares to be issued by Brasil Telecom in
connection with the corporate reorganization using the exchange ratios for each class of Brasil Telecom’s common and preferred shares as described in “Part Five: The Merger—Background of the Merger—Corporate
Reorganization—The Coari Merger,” and “Part Five: The Merger—Terms of the Merger,” assuming that these shares were outstanding as from January 1, 2010 and January 1, 2011, as applicable.
The pro forma diluted weighted average number of outstanding shares was estimated considering (1) the shares to be issued by Brasil
Telecom in connection with the corporate reorganization using the exchange ratios for each class of Brasil Telecom’s common and preferred shares as described in “Part Five: The Merger—Background of the Merger—Corporate
Reorganization—The Coari Merger,” and “Part Five: The Merger—Terms of the Merger,” assuming that these shares were outstanding as from January 1, 2010 and January 1, 2011, as applicable, and (2) the potentially dilutive
effect of the TNL stock options which we expect to migrate to a Brasil Telecom stock option plan using the same exchange ratios as described in (1) above.
6. Withdrawal Rights
As described in Part Five: The Merger—Background
of the Merger—Corporate Reorganization—The Split-Off and Share Exchange,” the split-off and share exchange will give withdrawal rights to certain non-controlling holders of TNL and Telemar in connection with the corporate
reorganization. Based on uncertainties in regards to the exercise of the withdrawal rights by these non-controlling shareholders, we believe a pro-forma adjustment to give effect to the potential exercise of these withdrawal rights is not factually
supportable, and, therefore, was not included in this pro forma financial information.
36
Ratio of Combined Fixed Charges and Preference Dividends
to Earnings
The table below provides the historical ratio of combined fixed charges and preference dividends to earnings
for each of TNL and Brasil Telecom for the periods indicated under IFRS, and the pro forma ratio of combined fixed charges and preference dividends to earnings of Brasil Telecom for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
TNL
|
|
|
Brasil
Telecom
|
|
|
Brasil
Telecom
(Pro Forma)
|
|
|
Year ended December 31, 2009 (1)
|
|
|
3.12x
|
|
|
|
(2.90
|
)x
|
|
|
|
|
|
Year ended December 31, 2010
|
|
|
1.47x
|
|
|
|
5.85x
|
|
|
|
2.45x
|
|
|
Six-month period ended June 30, 2011 (2)
|
|
|
0.99x
|
|
|
|
3.66x
|
|
|
|
1.86x
|
|
|
(1)
|
Brasil Telecom’s loss was R$1,042 million and its combined fixed charges and preference dividends were R$359 million for the year ended December 31, 2009.
|
|
(2)
|
TNL’s earnings were R$19 million less than its combined fixed charges and preference dividends for the six-month period ended June 30, 2011.
|
For purposes of calculation of the ratio of combined fixed charges and preference dividends to earnings,
earnings consist of:
|
|
•
|
|
pre-tax income from continuing operations before adjustment for non-controlling interest in consolidated subsidiaries income or loss from equity
investees;
|
|
|
•
|
|
fixed charges (as defined below) and amortization of capitalized interest;
|
|
|
•
|
|
distributed income of equity investees; and
|
|
|
•
|
|
share of pre-tax losses of equity investees for which charges arising from guarantees are included in fixed charges;
|
|
|
•
|
|
preferred share dividend requirements of consolidated subsidiaries (not preferred dividends of parent); and
|
|
|
•
|
|
non-controlling interest from pre-tax income of subsidiaries that have not incurred fixed charges.
|
Fixed charges consist of the sum of interest, whether expensed or capitalized (and from both continuing and discontinued operations),
amortization of premiums, discounts and capitalized expenses related to indebtedness, amounts accrued with respect to guarantees of other parties’ obligations, and the estimated interest component of rental expense, and preferred share dividend
requirements represent the amount of pre-tax earnings that would be required to pay the dividends on outstanding preferred shares of TNL or Brasil Telecom, as applicable, and other fully or proportionally consolidated entities.
37
Summary Comparative Per Share Data
Brasil Telecom has derived the unaudited pro forma combined information appearing below from the unaudited pro forma financial
information of Brasil Telecom appearing elsewhere in this prospectus. Brasil Telecom has derived the historical information appearing below from the audited consolidated financial statements of Brasil Telecom and TNL as of December 31, 2010 and
for the year then ended, prepared in accordance with IFRS, which are incorporated into this prospectus by reference to the Brasil Telecom Annual Report and the TNL Annual Report, respectively, and from the unaudited consolidated interim financial
information of Brasil Telecom and TNL as of June 30, 2011 and for the six- month period then ended, prepared in accordance with IFRS, which are incorporated into this prospectus by reference to the Brasil Telecom First Half Report and the TNL
First Half Report, respectively.
You should read the information below together with the pro forma financial data of Brasil
Telecom appearing elsewhere in this prospectus, and the historical financial statements of Brasil Telecom and TNL incorporated by reference into this prospectus. The unaudited pro forma combined financial data appearing below is for illustrative
purposes only. Brasil Telecom and TNL may have performed differently had they always been a combined entity. You should not rely on this information as being indicative of the actual results of that the combined businesses of these companies will
experience after the merger.
For more information about historical dividend payments by Brasil Telecom and TNL, see
“Part Six—Shareholder Rights—Comparative Share and Dividend Information—Information About Historical Dividend Payments.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the
Six-Month Period Ended June 30, 2011
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
Brasil
Telecom
|
|
|
TNL
|
|
|
Brasil
Telecom
|
|
|
Per Share
Equivalent
TNL(1)
|
|
|
|
|
|
(in
reais
)
|
|
|
Book value per common share
|
|
R$
|
17.67
|
|
|
R$
|
29.31
|
|
|
R$
|
8.24
|
|
|
R$
|
19.06
|
|
|
Book value per preferred share
|
|
|
17.67
|
|
|
|
29.31
|
|
|
|
8.24
|
|
|
|
17.43
|
|
|
Cash dividends per common share (2)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Cash dividends declared per preferred share (2)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Income (loss) per common share from continuing operations
|
|
|
0.79
|
|
|
|
0.06
|
|
|
|
0.42
|
|
|
|
0.97
|
|
|
Income (loss) per preferred share from continuing operations
|
|
|
0.79
|
|
|
|
0.06
|
|
|
|
0.42
|
|
|
|
0.89
|
|
|
(1)
|
The TNL per common share equivalent data are calculated by multiplying the Brasil Telecom pro forma per common share amounts by 2.3122, representing the number of
Brasil Telecom common shares that will be received for each TNL common share in the merger, assuming that none of the shareholders of TNL exercises appraisal rights. The TNL per preferred share equivalent data are calculated by adding (1) the
Brasil Telecom pro forma per common share amounts multiplied by 0.1879, representing the number of Brasil Telecom common shares that will be received for each TNL preferred share in the merger, assuming that none of the shareholders of TNL exercises
appraisal rights, and (2) the Brasil Telecom pro forma per preferred share amounts multiplied by 1.9262, representing the number of Brasil Telecom preferred shares that will be received for each TNL preferred share in the merger, assuming that
none of the shareholders of TNL exercises appraisal rights.
|
|
(2)
|
Interest on shareholders’ equity is included and is presented net of taxes.
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Year Ended
December 31, 2010
|
|
|
|
|
Historical
|
|
|
Pro Forma
|
|
|
|
|
Brasil
Telecom
|
|
|
TNL
|
|
|
Brasil
Telecom
|
|
|
Per Share
Equivalent
TNL(1)
|
|
|
|
|
|
(in
reais
)
|
|
|
Book value per common share
|
|
R$
|
19.22
|
|
|
R$
|
29.22
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
Book value per preferred share
|
|
|
19.22
|
|
|
|
29.22
|
|
|
|
—
|
|
|
|
—
|
|
|
Cash dividends per common share (2)
|
|
|
0.30
|
|
|
|
0.86
|
|
|
|
0.29
|
|
|
|
0.68
|
|
|
Cash dividends declared per preferred share (2)
|
|
|
0.30
|
|
|
|
0.90
|
|
|
|
0.27
|
|
|
|
0.58
|
|
|
Income (loss) per common share from continuing operations
|
|
|
3.34
|
|
|
|
3.73
|
|
|
|
2.04
|
|
|
|
4.72
|
|
|
Income (loss) per preferred share from continuing operations
|
|
|
3.34
|
|
|
|
3.73
|
|
|
|
2.04
|
|
|
|
4.31
|
|
|
(1)
|
The TNL per common share equivalent data are calculated by multiplying the Brasil Telecom pro forma per common share amounts by 2.3122, representing the number of
Brasil Telecom common shares that will be received for each TNL common share in the merger, assuming that none of the shareholders of TNL exercises appraisal rights. The TNL per preferred share equivalent data are calculated by adding (1) the
Brasil Telecom pro forma per common share amounts multiplied by 0.1879, representing the number of Brasil Telecom common shares that will be received for each TNL preferred share in the merger, assuming that none of the shareholders of TNL exercises
appraisal rights, and (2) the Brasil Telecom pro forma per preferred share amounts multiplied by 1.9262, representing the number of Brasil Telecom preferred shares that will be received for each TNL preferred share in the merger, assuming that
none of the shareholders of TNL exercises appraisal rights.
|
|
(2)
|
Interest on shareholders’ equity is included and is presented net of taxes.
|
39
Historical and Pro Forma Share Information
The following tables show the closing prices of the common shares, preferred shares and ADSs of Brasil Telecom and TNL, as well as the
equivalent value of the common shares and preferred shares of TNL based on the exchange ratios for the merger, as of August 26, 2011, the last trading day preceding the date on of which the detailed terms of the merger were first announced, and
as of May 23, 2011, the last trading day preceding public announcement of the corporate reorganization.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 26, 2011
|
|
|
|
|
(Actual)
|
|
|
(Per share
equivalent)
|
|
|
|
|
Brasil
Telecom
|
|
|
TNL
|
|
|
TNL
|
|
|
Common shares(1) (
reais)
|
|
R$
|
12.50
|
|
|
R$
|
21.27
|
|
|
R$
|
28.93
|
|
|
Preferred shares(2) (
reais)
|
|
|
11.07
|
|
|
|
19.27
|
|
|
|
23.67
|
|
|
Preferred ADS(3) (U.S. dollars)
|
|
US$
|
20.99
|
|
|
US$
|
12.21
|
|
|
US$
|
14.90
|
|
|
Common ADS (U.S. dollars)
|
|
|
7.59
|
|
|
|
|
|
|
|
|
|
Source:
BM&FBOVESPA; Bloomberg.
|
(1)
|
The TNL common share per share equivalent data is calculated by multiplying the Brasil Telecom actual amount by 2.3122, the number of Brasil Telecom common shares that
will be received for each TNL common share in the merger.
|
|
(2)
|
The TNL preferred share per share equivalent data is calculated by adding (1) the Brasil Telecom common share actual amount multiplied by 0.1879, the number of
Brasil Telecom common shares that will be received for each TNL preferred share in the merger, and (2) the Brasil Telecom preferred share actual amount multiplied by 1.9262, the number of Brasil Telecom preferred shares that will be received
for each TNL preferred share in the merger.
|
|
(3)
|
The TNL ADS per share equivalent data is calculated by adding (1) the Brasil Telecom Common ADS actual amount multiplied by 0.1879, the number of Brasil Telecom
Common ADS that will be received for each TNL ADS in the merger, and (2) the Brasil Telecom Preferred ADS actual amount multiplied by 0.6420, the number of Brasil Telecom Preferred ADS that will be received for each TNL ADS in the merger.
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 23, 2011
|
|
|
|
|
(Actual)
|
|
|
(Per share
equivalent)
|
|
|
|
|
Brasil
Telecom
|
|
|
TNL
|
|
|
TNL
|
|
|
Common shares(1) (
reais)
|
|
R$
|
16.92
|
|
|
R$
|
32.00
|
|
|
R$
|
39.12
|
|
|
Preferred shares(2) (
reais)
|
|
|
15.32
|
|
|
|
26.40
|
|
|
|
32.69
|
|
|
Preferred ADS(3) (U.S. dollars)
|
|
US$
|
28.42
|
|
|
US$
|
16.55
|
|
|
US$
|
20.17
|
|
|
Common ADS (U.S. dollars)
|
|
|
10.22
|
|
|
|
|
|
|
|
|
|
Source:
BM&FBOVESPA; Bloomberg.
|
(1)
|
The TNL common share per share equivalent data is calculated by multiplying the Brasil Telecom actual amount by 2.3122, the number of Brasil Telecom common shares that
will be received for each TNL common share in the merger.
|
|
(2)
|
The TNL preferred share per share equivalent data is calculated by adding (1) the Brasil Telecom common share actual amount multiplied by 0.1879, the number of
Brasil Telecom common shares that will be received for each TNL preferred share in the merger, and (2) the Brasil Telecom preferred share actual amount multiplied by 1.9262, the number of Brasil Telecom preferred shares that will be received
for each TNL preferred share in the merger.
|
|
(3)
|
The TNL ADS per share equivalent data is calculated by adding (1) the Brasil Telecom Common ADS actual amount multiplied by 0.1879, the number of Brasil Telecom
Common ADS that will be received for each TNL ADS in the merger, and (2) the Brasil Telecom Preferred ADS actual amount multiplied by 0.6420, the number of Brasil Telecom Preferred ADS that will be received for each TNL ADS in the merger.
|
We urge you to obtain current market quotations.
41
Exchange Rates
The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of
reais
by
any person or legal entity, regardless of the amount, subject to certain regulatory procedures.
Since 1999, the Central Bank
has allowed the U.S. dollar-
real
exchange rate to float freely, and, since then, the U.S. dollar-
real
exchange rate has fluctuated considerably.
In the past, the Central Bank has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to
permit the
real
to float freely or will intervene in the exchange rate market through the return of a currency band system or otherwise. The
real
may depreciate or appreciate against the U.S. dollar and/or the euro substantially.
Furthermore, Brazilian law provides that, whenever there is a significant imbalance in Brazil’s balance of payments or there are serious reasons to foresee a significant imbalance, temporary restrictions may be imposed on remittances of foreign
capital abroad. We cannot assure you that such measures will not be taken by the Brazilian government in the future. See “Part Three—Risk Factors—Risks Relating to Brazil—Restrictions on the movement of capital out of Brazil may
impair our ability to service certain debt obligations.”
The following table shows the selling rate for U.S. dollars for
the periods and dates indicated
.
The information in the “Average” column represents the average of the exchange rates on the last day of each month during the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reais per U.S. Dollar
|
|
|
Year
|
|
High
|
|
|
Low
|
|
|
Average
|
|
|
Period End
|
|
|
2006
|
|
R$
|
2.371
|
|
|
R$
|
2.059
|
|
|
R$
|
2.168
|
|
|
R$
|
2.138
|
|
|
2007
|
|
|
2.156
|
|
|
|
1.733
|
|
|
|
1.930
|
|
|
|
1.771
|
|
|
2008
|
|
|
2.500
|
|
|
|
1.559
|
|
|
|
1.834
|
|
|
|
2.337
|
|
|
2009
|
|
|
2.422
|
|
|
|
1.702
|
|
|
|
1.994
|
|
|
|
1.741
|
|
|
2010
|
|
|
1.881
|
|
|
|
1.655
|
|
|
|
1.759
|
|
|
|
1.666
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
1.691
|
|
|
|
1.629
|
|
|
|
1.667
|
|
|
|
1.629
|
|
|
June 30, 2011
|
|
|
1.634
|
|
|
|
1.561
|
|
|
|
1.596
|
|
|
|
1.561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reais per U.S. Dollar
|
|
|
Month
|
|
High
|
|
|
Low
|
|
|
February 2011
|
|
R$
|
1.678
|
|
|
R$
|
1.661
|
|
|
March 2011
|
|
|
1.676
|
|
|
|
1.629
|
|
|
April 2011
|
|
|
1.619
|
|
|
|
1.565
|
|
|
May 2011
|
|
|
1.634
|
|
|
|
1.575
|
|
|
June 2011
|
|
|
1.611
|
|
|
|
1.561
|
|
|
July 2011
|
|
|
1.583
|
|
|
|
1.535
|
|
|
August 2011 (through August 26)
|
|
|
1.633
|
|
|
|
1.555
|
|
Source
: Central Bank
42
PART THREE—RISK FACTORS
You should consider the following risks as well as the other information set forth in this prospectus when evaluating an investment in
our company. In general, investing in the securities of issuers in emerging market countries, such as Brazil, involves a higher degree of risk than investing in the securities of issuers in the United States. Additional risks and uncertainties not
currently known to us, or those that we currently deem to be immaterial, may also materially and adversely affect our business, results of operations, financial condition and prospects. Any of the following risks could materially affect us. In such
case, you may lose all or part of your original investment.
Risks Relating to the Merger
Holders of TNL common shares, preferred shares and ADSs are being offered a fixed number of Brasil Telecom common shares, preferred
shares and ADSs, which involves the risk of market fluctuations.
Holders of TNL common shares, preferred shares and
ADSs, collectively referred to as TNL securities, will receive a fixed number of Brasil Telecom common shares, preferred shares and ADSs, collectively referred to as Brasil Telecom securities, in the merger, rather than a number of Brasil Telecom
securities with a fixed market value. In addition, there is no mechanism to adjust the exchange ratios in the event that the market price of either the Brasil Telecom securities or the TNL securities increases or decreases significantly relative to
the other. Consequently, the market values of Brasil Telecom securities, and of the TNL securities at the time of the completion of the merger, may fluctuate significantly from the date of this prospectus and the exchange ratio that has been
approved for the merger might not be reflective of current market price ratios of Brasil Telecom securities relative to TNL securities.
On August 26, 2011, the last trading day preceding the date on of which the detailed terms of the merger were first announced, the closing price on the BM&FBOVESPA for Brasil Telecom common
shares and preferred shares was R$12.50 and R$11.07, respectively, the market value of 2.3122 Brasil Telecom common shares, the number of Brasil Telecom common shares to be received for each TNL common share in the merger, was R$28.93, and the
closing price on the BM&FBOVESPA for TNL common shares was R$21.27. On August 26, 2011, the aggregate market value of 0.1879 Brasil Telecom common shares and 1.9262 Brasil Telecom preferred shares, the number of Brasil Telecom common shares
and preferred shares to be received for each TNL preferred share in the merger, was R$23.67, and the closing price on the BM&FBOVESPA for TNL preferred shares was R$19.27.
On August 26, 2011, the closing price on the NYSE for Brasil Telecom Common ADSs and Brasil Telecom Preferred ADSs was US$7.59 and US$20.99, respectively, the aggregate market value of 0.1879 Brasil
Telecom Common ADSs and 0.6420 Brasil Telecom Preferred ADSs, the number of Brasil Telecom Common ADSs and Preferred ADSs to be received for each TNL ADS in the merger, was US$14.90 and the closing price on the NYSE for TNL ADSs was US$12.21.
The market price of Brasil Telecom securities and TNL securities may be adversely affected by arbitrage activities occurring prior to
the completion of the merger.
The market price of Brasil Telecom securities and TNL securities may be adversely
affected by arbitrage activities occurring prior to the completion of the merger. These sales, or the prospects of such sales in the future, could adversely affect the market price for, and the ability to sell in the market, Brasil Telecom
securities and TNL securities before the merger is completed and Brasil Telecom securities after the merger is completed. Any adverse effect on the market prices of the Brasil Telecom securities or TNL securities, could cause the exchange ratio that
has been approved for the merger not to be reflective of current market price ratios of Brasil Telecom securities relative to TNL securities, as discussed above, and could adversely affect the cash value that you will receive for any fractional
security to which you otherwise would have been entitled in the merger.
43
PART THREE—RISK FACTORS
Your ownership percentage in Brasil Telecom, as the surviving entity in
the merger, will be less than the ownership percentage you currently hold in TNL.
Because there are many existing
shareholders of Brasil Telecom, and the other steps of the corporate reorganization will result in additional shareholders of Brasil Telecom, your ownership percentage in Brasil Telecom will, as a result of the merger, be less than your existing
ownership percentage in TNL. Assuming that none of the holders of shares of TNL, Telemar or Coari exercise withdrawal rights, as a result of the various steps of the corporate reorganization, former shareholders of TNL, other than TmarPart, Valverde
and the shareholders of TmarPart, will hold approximately 32.0% of the outstanding capital stock of Brasil Telecom, following the corporate reorganization as compared to 56.4% the total share capital of TNL prior to the corporate reorganization.
Similarly, the ownership percentage in Brasil Telecom of existing minority shareholders of Brasil Telecom will be diluted as a result of the issuance of the new Brasil Telecom shares in the corporate reorganization, and the percentage of the
outstanding capital stock of Brasil Telecom held by non-controlling shareholders of Brasil Telecom prior to the merger, who will own approximately 50.7% of the outstanding capital stock of Brasil Telecom prior to the corporate reorganization, will
decrease to approximately 16.9% following the corporate reorganization.
Brasil Telecom may have actual or potential conflicts of
interest relating to the merger.
Brasil Telecom may have actual or potential conflicts of interest because TmarPart,
the controlling shareholder of Brasil Telecom and of TNL exercises voting control over the boards of directors of Brasil Telecom and TNL. While the exchange ratios were determined in accordance with all applicable laws and regulations in Brazil,
these ratios may be higher or lower than, from the perspective of value to unaffiliated shareholders, those that could be achieved through arm’s length negotiations between unrelated parties.
Brazilian law generally imposes on a board of directors a fiduciary duty to assure that contracts with related parties be on arm’s
length terms. Guideline 35 recommends that where a controlling company and its subsidiaries or affiliated companies are involved in a merger, a special committee be established to protect the interests of the non-controlling shareholders and
negotiate the terms and conditions for such corporate transaction. Brasil Telecom and TNL have voluntarily elected to follow the recommendations set forth in Guideline 35. Nevertheless, in connection with the merger, Brazilian law does not
(1) establish any specific, minimum or maximum exchange ratio, (2) require that the board of directors of Brasil Telecom or TNL formally determine that the terms of the merger as a whole are “fair,” either procedurally or
financially, to its non-controlling shareholders, (3) establish any special committee or otherwise alter its corporate governance rules in connection with the merger, or (4) impose any prohibition or limitation on the voting rights of the
controlling shareholder.
Under the Brazilian Corporation Law, because the merger involves a controlling and controlled
company, we and TNL are required to disclose the ratio of the value of TNL shares and Brasil Telecom shares calculated based on the net worth calculated at market prices (as if the assets of Brasil Telecom and TNL had been sold), based on valuation
reports prepared by an independent financial advisor. This exchange ratio is required to be disclosed in order to provide the non-controlling shareholders with a parameter against which to evaluate the proposed merger and to determine whether to
dissent from the shareholder vote and exercise withdrawal rights. The applicable exchange ratio calculated based on the criteria of net worth calculated at market prices is 2.302004 Brasil Telecom common shares or preferred shares for each TNL share
of the same class.
Brasil Telecom and TNL have engaged Apsis to conduct valuation analyses for the purpose of appraising the
TNL shares. The fees for the valuation reports prepared by Apsis will be paid entirely by Brasil Telecom and TNL. The full text of the Apsis valuation reports are included as exhibits to the registration statement of which this prospectus forms a
part. See “Part Five—The Merger—Presentations and Valuation Reports” for a summary description of the Apsis valuation reports.
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PART THREE—RISK FACTORS
The exercise of withdrawal rights by holders of TNL common shares could
decrease cash balances of Brasil Telecom, as the surviving company in the merger, and otherwise adversely affect its financial condition.
As described in “Part Five—The Merger—Terms of the Merger—Withdrawal Rights,” the holders of TNL common shares that dissent from the merger have the right to withdraw their share
capital from TNL and be reimbursed for the value of the common shares for which they were record holders at the close of trading on May 24, 2011, the date of the Relevant Fact that first announced the merger. If holders of a significant number
of these shares exercise their withdrawal rights, the requirement to make large cash payments could decrease the cash balances of Brasil Telecom, as the surviving company in the merger, limit its ability to borrow funds or fund capital expenditures
or prevent Brasil Telecom from complying with existing contractual obligations. In addition, under the Brazilian Corporation Law, if the management of TNL believes that the total value of the withdrawal rights exercised by its shareholders may put
at risk its financial stability, management may, within 10 days after the end of the withdrawal rights period, call an extraordinary general shareholders’ meeting of TNL to either unwind or ratify the merger. Because it and its affiliates hold,
directly and indirectly, a majority of the voting shares of TNL, TmarPart would be able to cause the unwinding of the merger at the applicable extraordinary general shareholders’ meeting.
The exercise of withdrawal rights by Telemar shareholders in connection with the split-off and share exchange may negatively affect the financial
condition of Brasil Telecom.
As described in “Part Five—The Merger—Background of the
Merger—Corporate Reorganization,” Coari and Telemar will enter into the split-off and share exchange as part of the corporate reorganization. Telemar shareholders that dissent from the split-off and share exchange have the right to
withdraw their share capital from Telemar and be reimbursed for the value of the Telemar shares for which they were record holders at the close of trading on May 24, 2011, the date of the Relevant Fact that first announced the split-off and
share exchange. Telemar shareholders who exercise such withdrawal rights will be entitled to receive R$ per share. The closing sales prices on August 26, 2011 for Telemar common
shares, class A preferred shares and class B preferred shares on the BM&FBOVESPA were R$58.00, R$43.38 and R$45.01 respectively. As a result, we expect a significant number of non-affiliated shareholders of Telemar to exercise their withdrawal
rights. If all non-affiliated shareholders of Telemar exercised these withdrawal rights, the aggregate amount that Telemar would be required to pay to repurchase the shares of these shareholders would by
R$ million. Although the management of Telemar has advised us that it does not expect to propose the unwinding of the split-off and share exchange, under the Brazilian
Corporation Law, if the management of Telemar believes that the total value of the withdrawal rights exercised by its shareholders may put at risk its financial stability, management may, within 10 days after the end of the withdrawal rights period,
call an extraordinary general shareholders’ meeting of Telemar to either unwind or ratify the merger. If holders of a significant number of these shares exercise their withdrawal rights and the split-off and share exchange is not unwound, the
requirement to make large cash payments would decrease the cash balances of Telemar and could limit its ability to borrow funds or fund capital expenditures or prevent it from complying with existing contractual obligations, all of which could
negatively affect the financial condition of Brasil Telecom following the corporate reorganization which will result in Telemar becoming a wholly-owned subsidiary of Brasil Telecom.
ANATEL may impose significant obligations on our company as conditions to their approval of the merger, and compliance with these obligations could materially and adversely affect our business,
financial condition and results of operations.
Under Brazilian antitrust regulations, the merger must be submitted to
ANATEL to assess its effects on competition. In accordance with Brazilian law, we have submitted the merger to ANATEL. As of the date of this prospectus, ANATEL had not yet released its findings. If ANATEL takes any action to impose conditions or
performance commitments on us as part of the approval process for the merger, including conditions that could
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PART THREE—RISK FACTORS
require us to undertake significant capital expenditures, it could materially and adversely affect our business, financial condition and results of operations and prevent our company from
achieving the anticipated benefits of the merger. See “Part Eight–Legal and Regulatory Matters—Regulatory Approvals—Brazilian Antitrust Review.”
The Brazilian antitrust authorities could impose costly or restrictive conditions on the approval of the merger, which could adversely affect our business and results of operations.
Under Brazilian antitrust regulations, following ANATEL review, the merger must be submitted to the Brazilian
antitrust regulator (
Conselho Administrativo de Defesa Econômica
), or CADE, for final approval. As of the date of this prospectus, the merger had not yet been submitted to CADE. However, Brazilian law permits us to consummate this
transaction prior to receiving this final approval, unless CADE issues a writ of prevention blocking the transaction or requires the parties to enter into an agreement permitting the effects of the transaction to be reversed which, by its terms,
delays the consummation of the transaction. The antitrust authorities will determine whether this transaction negatively impacts competitive conditions in the markets in which we compete or adversely affects consumers in these markets.
If CADE does not grant a final approval for the merger, we could be required to unwind the merger. In addition, if CADE takes any action
to impose conditions or performance commitments on us as part of the approval process for the merger, it could materially and adversely affect our business and results of operations and prevent us from achieving the anticipated benefits of the
merger. See “Part Eight–Legal and Regulatory Matters—Regulatory Approvals—Brazilian Antitrust Review.”
The
merger may not result in the benefits that Brasil Telecom seeks to achieve, including increased share liquidity.
Brasil Telecom is undertaking the merger because it believes that the merger will provide Brasil Telecom, TNL and their respective
shareholders with a number of advantages, including providing shareholders of TNL with securities that Brasil Telecom expects will enjoy greater market liquidity than the securities these shareholders currently hold. However, the merger may not
accomplish these objectives. Brasil Telecom cannot predict whether a liquid market for the newly issued Brasil Telecom securities will be maintained. If the merger does not result in increased liquidity for the securities held by shareholders of
TNL, you may experience a decrease in your ability to sell your Brasil Telecom securities compared to your ability to sell the TNL securities you currently hold.
The CVM, the Brazilian securities regulator, may suspend, for up to 15 days, the shareholders’ meetings scheduled to approve the merger.
Following the publication by Brasil Telecom and TNL of the notices for the shareholders’ meetings to consider the merger, the CVM
will, if requested to do so by a shareholder of Brasil Telecom or TNL, review the terms and conditions of the merger to ensure that the merger complies with applicable provisions of Brazilian law. The CVM may suspend, for up to 15 days, the
extraordinary general shareholders’ meetings scheduled to approve the merger in order to analyze the merger and verify that it does not breach applicable laws or regulations. Although Brasil Telecom believes that the proposed merger described
in this prospectus is legal and provides equitable treatment to holders of Brasil Telecom and TNL securities, Brasil Telecom cannot predict the outcome of any such analysis of the merger by the CVM.
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PART THREE—RISK FACTORS
There is no clear guidance under Brazilian law regarding the income tax
consequences to investors resulting from the merger.
We are not aware of any specific legal provision or
administrative or judicial court precedent regarding the Brazilian income tax consequences to investors which are not domiciled or resident in Brazil, or non-Brazilian investors, resulting from a merger of one Brazilian company into another
Brazilian company. We understand that there are reasonable legal grounds to sustain that the receipt (resulting from the merger), by a non-Brazilian investor, of Brasil Telecom securities should not be subject to income tax pursuant to Brazilian tax
law. However, this position may not prevail, in which case Brasil Telecom would be liable to the Brazilian tax authorities for withholding and collecting the income tax levied on the capital gains of the non-Brazilian investors. See “Part
Five—The Merger—Material Tax Considerations—Brazilian Tax Considerations.”
There is no official guidance from the
Brazilian tax authorities regarding the applicability of the IOF/Securities Tax with respect to situations such as the merger.
Under Brazilian law, the Tax on Transactions Involving Bonds and Securities, or the IOF/Securities Tax, applies to transactions involving the transfer (
cessão
) of shares by a Brazilian
company with the specific purpose of enabling the issuance of ADSs. Upon such a transfer, the IOF/Securities Tax is levied on holders of shares and ADSs at the rate of 1.5%, calculated based on the product of (a) the number of shares
transferred, multiplied by (b) the closing price for such shares on the date prior to the date of the transfer. We do not expect that holders receiving Brasil Telecom ADSs will be charged any IOF/Securities Tax at the time of the settlement of
the share exchange, because for purposes of the IOF/Securities Tax, there will be no transfer of Brasil Telecom shares with the specific purpose of issuing Brasil Telecom ADSs. However, there is no official guidance confirming our belief that
this tax is not due, because the Brazilian legislation governing the levy of the IOF/Securities Tax in situations such as the merger is very recent. As a result, there is a risk that the Brazilian tax authorities will adopt an interpretation that
the IOF/Securities Tax applies to the merger. If such an interpretation is adopted, the Brazilian tax authorities could impose the IOF/Securities Tax on the holders of the TNL ADSs with respect to the deposit in the Brasil Telecom ADS programs
of the Brasil Telecom shares received in exchange for the TNL shares represented by the TNL ADSs. If this interpretation is adopted following the deposit of the Brasil Telecom shares in the Brasil Telecom ADS programs and is given retroactive
effect, governmental charges, including interest and penalties, could be imposed. If any IOF/Securities Tax is imposed on the deposit of Brasil Telecom shares in connection with the share exchange and the custodian of the Brasil Telecom shares
becomes obligated to pay that tax or any penalties or interest, such custodian may assess that tax or other governmental charges against holders of Brasil Telecom ADSs. Under the terms of the deposit agreements under which the Brasil Telecom ADSs
are issued, the Brasil Telecom Depositary may refuse to register any transfer of your Brasil Telecom ADSs or allow you to withdraw the deposited Brasil Telecom shares represented by your Brasil Telecom ADSs until such tax or other governmental
charges are paid. In addition, the Brasil Telecom Depositary may apply payments owed to you (such as dividends) to payment of that tax or other governmental charges or sell a portion of the deposited Brasil Telecom shares that is sufficient to pay
that tax or other governmental charges. In either event, the owner or beneficial owner of the Brasil Telecom ADSs would remain liable for any deficiency. See “Part Five—The Merger—Material Tax Considerations—Brazilian Tax
Considerations.”
As a result of the corporate reorganization, Brasil Telecom will be more leveraged than prior to the corporate
reorganization and a significant portion of its cash flow will have to be used to service its obligations.
Upon the
completion of the corporate reorganization, Brasil Telecom will assume all of the outstanding consolidated debt of TNL. As of June 30, 2011, TNL had R$23,942 million aggregate principal of outstanding debt on a consolidated basis, of which
R$3,724 was debt of Brasil Telecom. Brasil Telecom will be subject to the risks normally associated with significant amounts of debt, which could have important consequences to you.
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PART THREE—RISK FACTORS
Brasil Telecom’s indebtedness could, among other things:
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require it to use a substantial portion of its cash flow from operations to pay its obligations, thereby reducing the availability of their cash flow
to fund working capital, operations, capital expenditures, dividend payments, strategic acquisitions, expansion of their operations and other business activities;
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increase its vulnerability to general adverse economic and industry conditions;
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limit, along with financial and other restrictive covenants in its debt instruments, its ability to borrow additional funds or dispose of assets; and
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place it at a competitive disadvantage compared to its competitors that have less debt.
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Brasil Telecom may also need to refinance all or a portion of this debt on or before maturity, and it may not be able to do this on
commercially reasonable terms or at all.
Risks Relating to the Brazilian Telecommunications
Industry, Our Company and TNL
The fixed-line telecommunication services of our company and TNL face increased competition from
mobile services providers, other fixed-line service providers and cable television service providers, which may adversely affect our respective revenues and margins.
Our fixed-line telecommunication services in Region II, and TNL’s fixed-line telecommunication services in Region I and Region II face increasing competition from mobile services as the prices for
mobile services decline and approach those of fixed-line services. Based on information available from ANATEL, from December 2007 to December 2010, the number of fixed lines in service in Brazil increased from 39.4 million to 42.0 million
as a result of the increase in the number of fixed lines in service in Region III, while the number of fixed lines in service in Regions I and II declined. We expect (1) the number of fixed lines in service in Regions I and II to continue to
stagnate or decline, as certain customers eliminate their fixed-line services in favor of mobile services, and (2) the use of existing fixed lines to decrease as customers substitute calls on mobile phones in place of fixed-line calls as a
result of promotional mobile rates (such as free calls within a mobile provider’s network). The rate at which the number of fixed lines in service in Brazil may decline depends on many factors beyond our control, such as economic, social,
technological and other developments in Brazil. In addition, new fixed lines that we and TNL install are expected to be less profitable than existing ones because new fixed-line customers generally have lower average incomes than our existing
customers, subscribe to lower cost service plans and generate fewer chargeable minutes of usage. Our traditional local fixed-line telecommunication services represented 30.8% and 30.2% of our gross operating revenue for the six-month period ended
June 30, 2011 and the year ended December 31, 2010, respectively, and TNL’s traditional local fixed-line telecommunication services represented 35.7% and 36.3% of its gross operating revenue for the six-month period ended
June 30, 2011 and the year ended December 31, 2010, respectively. Because we derive a significant portion of our net operating revenue from our traditional local fixed-line telecommunication services, a reduction in the number of our
fixed-lines in service would negatively affect our net operating revenue and margins.
We and TNL also compete in the market
for local fixed-line services with other fixed-line service providers, primarily with Empresa Brasileira de Telecomunicações – Embratel, or Embratel, and GVT S.A., or GVT. In addition to direct competition with TNL for corporate
customers in Region I, Embratel competes with TNL and our company for residential customers in Regions I and II with services that it provides using the cable infrastructure of its affiliate, Net Serviços de Comunicação S.A., or
Net. Net is a cable television company that is the main competitor of TNL and our company in the broadband services market. Embratel and Net are affiliates of Teléfonos de México S.A.B. de C.V., or Telmex, one of the leading
telecommunication service providers in Latin America. Under an agreement entered into between Embratel and Net in November 2005, Net offers
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PART THREE—RISK FACTORS
integrated voice, broadband and pay television services to the Brazilian residential market through a single network infrastructure. In addition, we and TNL compete in with smaller companies that
have been authorized by ANATEL to provide local fixed-line services. Embratel, GVT and Net are each controlled by multinational companies that may have more significant financial and marketing resources, and greater abilities to access capital on a
timely basis and on more favorable terms, than our company.
The loss of a significant number of fixed-line customers by TNL
or our company would adversely affect our respective net operating revenue and may adversely affect our respective results of operations. In addition, because callers in Brazil placing long-distance calls from their fixed-line telephones generally
tend to select the long-distance carrier affiliated with the provider of their fixed-line service, the loss of a significant number of fixed-line customers by TNL or our company may adversely affect our respective revenues from long-distance
services and our respective results of operations. For a detailed description of competition in the local fixed-line services markets that we and TNL serve, see “Item 4. Information on the Company—Competition—Local Fixed-Line
Services” in the Brasil Telecom Annual Report and the TNL Annual Report.
The mobile services of our company and TNL face strong
competition from other mobile services providers, which may adversely affect our respective revenues.
The mobile
services market in Brazil is extremely competitive. We face competition in Region II and TNL faces competition in Regions I, II and III from large competitors such as Vivo Participações S.A., or Vivo, Telecom Americas Group, which
markets its services under the brand name “Claro,” and TIM Participações S.A., or TIM.
We had an
estimated 14.7% and 15.1% share of the mobile services market in Region II as of June 30, 2011 and December 31, 2010, respectively, based on information regarding the total number of subscribers as of those dates available from ANATEL,
while as of those dates, Vivo had estimated market shares of 30.6% and 30.9%, respectively, Claro had estimated market shares of 29.0% and 28.7%, respectively, and TIM had estimated market shares of 25.6% and 25.0%, respectively. In addition, TNL
had an estimated 23.5% and 23.8% share of the mobile services market in Region I as of June 30, 2011 and December 31, 2010, respectively, based on information regarding the total number of subscribers as of those dates available from
ANATEL, while as of those dates, Vivo had estimated market shares of 27.1% and 26.9%, respectively, Claro had estimated market shares of 22.7% and 22.2%, respectively, and TIM had estimated market shares of 26.3% and 26.2%, respectively. TNL also
had an estimated 14.8% and 14.2% share of the mobile services market in Region III, which it entered in October 2008, as of June 30, 2011 and December 31, 2010, respectively, based on information regarding the total number of subscribers
as of those dates available from ANATEL, while as of those dates, Vivo had estimated market shares of 33.2% and 34.1%, respectively, Claro had estimated market shares of 27.8% and 28.5%, respectively, and TIM had estimated market shares of 24.1% and
23.1%, respectively. Vivo, TIM and Telecom Americas Group are each controlled by multinational companies that may have more significant financial and marketing resources, and greater abilities to access capital on a timely basis and on more
favorable terms, than our company or TNL.
The ability of our company and TNL to generate revenues from our mobile services
businesses depends on our respective abilities to increase and retain our customer bases. Each additional customer subscribing to our service entails costs, including sales commissions and marketing costs. Recovering these costs depends on our
ability to retain such customers. Therefore, high rates of customer churn could have a material adverse effect on the profitability of our mobile services businesses. Our average customer churn rate in the mobile services segment in Region II,
representing the number of subscribers whose service was disconnected during each month, whether voluntarily or involuntarily, divided by the number of subscribers at the beginning of such month, was 4.5% and 4.6% per month during the six-month
period ended June 30, 2011 and the year ended December 31, 2010, respectively. In addition, TNL’s average customer churn rate in the mobile services segment
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PART THREE—RISK FACTORS
in Region I was 3.3% and 2.9% per month during the six-month period ended June 30, 2011 and the year ended December 31, 2010, respectively, and 4.2% and 3.6% per month,
respectively, in Region III.
We and TNL have experienced increased pressure to reduce our rates in response to pricing
competition. This pricing competition often takes the form of special promotional packages, which may include, among other things, mobile handset subsidies, traffic usage promotions and incentives for calls made within a mobile services
provider’s own network. Competing with the service plans and promotions offered by our competitors may cause an increase in our respective marketing expenses and customer-acquisition costs, which could adversely affect our respective results of
operations. Our inability to compete effectively with these packages could result in our loss of market shares and adversely affect our respective net operating revenue and profitability. For a detailed description of competition in the mobile
services markets that we and TNL serve, see “Item 4. Information on the Company—Competition— Mobile Services” in the Brasil Telecom Annual Report and the TNL Annual Report.
The long-distance services of our company and TNL face significant competition, which may adversely affect our respective revenues.
In Brazil, unlike in the United States and elsewhere, a caller chooses its preferred long-distance carrier for each
long-distance call, whether originated from a fixed-line telephone or a mobile handset, by dialing such carrier’s long-distance carrier selection code (
Código de Seleção de Prestadora
). The long-distance services
market in Brazil is highly competitive. The principal competitor for long-distance services of our company and TNL is TIM, which in 2010 began aggressively promoting its long-distance services with significant discounts. Historically, the principal
competitor for long-distance services of our company and TNL have been Embratel, Telecomunicações de São Paulo S.A., or Telesp (the parent company of Vivo), and TIM. Generally, callers placing long-distance calls in Brazil from
their fixed-line telephones tend to select the long-distance carrier affiliated with the provider of their fixed-line service. Similarly, callers placing long-distance calls in Brazil from their mobile handsets tend to select the long-distance
carrier affiliated with the provider of their mobile or fixed-line service. However, increased competition from long-distance service providers has resulted in pressure on our long-distance rates and adversely affected the revenue from these
services of our company and TNL. In addition, aggressive discounting by TIM during 2010 has substantially reduced the market share of our company, TNL and other service providers in the long-distance market. Competition in the long-distance market
may require our company and TNL to increase our marketing expenses or provide services at lower rates than those we currently expect to charge for such services. Competition in the domestic long-distance market has had and could continue to have a
material adverse effect on our respective revenues and margins. See “Item 4. Information on the Company—Competition—Long-Distance Services” in the Brasil Telecom Annual Report and the TNL Annual Report.
Data transmission services are not subject to significant regulatory restrictions and, as a result, our company and TNL face an increasing amount
of competition in this business.
Competition in data transmission services is not subject to significant regulatory
restrictions and, therefore, the market is open to a large number of competitors. Some competitors, such as cable operators, offer telephone and broadband services, which do not require them to use the fixed-line networks of our company and TNL,
thereby allowing them to reach our customers without paying interconnection fees to our company or TNL. Additionally, although these auctions have not yet been scheduled, we anticipate that ANATEL will auction radio frequency licenses that will be
used to establish Worldwide Interoperability for Microwave Access, or WiMax, networks in 2012. The implementation of WiMax networks may allow other ISPs to deploy wireless Internet Protocol, or IP, networks over a much greater area, for a much lower
cost, than previously possible. This reduced deployment cost may give competitors of our company and TNL, or new entrants into the data transmission market, the ability to provide Voice over Internet Protocol, or VoIP, and other data services over
WiMax networks at lower rates than we are able to offer.
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PART THREE—RISK FACTORS
Increasing competition in data transmission services may lead
to rate reductions in this segment, adversely affecting the net operating revenue that we and TNL generate from this business. Additionally, increased competition for data transmission customers may require our company and TNL to increase our
marketing expenses and our capital expenditures and may lead to the loss of broadband customers, in each case leading to a decrease in our respective profitability. For a detailed description of competition in the data transmission services markets
that we and TNL serve, see “Item 4. Information on the Company—Competition—Data Transmission Services” in the Brasil Telecom Annual Report and the TNL Annual Report.
The telecommunications industry is subject to frequent changes in technology. The ability of our company and TNL to remain competitive depends on our ability to implement new technology, and it is
difficult to predict how new technology will affect our respective businesses.
Companies in the telecommunications
industry must adapt to rapid and significant technological changes that are usually difficult to anticipate. The mobile telecommunications industry in particular has experienced rapid and significant technological development and frequent
improvements in capacity, quality and data-transmission speed. Technological changes may render the equipment, services and technology of our company and TNL obsolete or inefficient, which may adversely affect our respective competitiveness or
require our company or TNL to increase our capital expenditures in order to maintain our competitive position. For example, we and TNL made significant investments in the last three years in connection with the implementation of our respective
Universal Mobile Telecommunications System services, which we refer to as 3G services. While we and TNL have been upgrading our fixed-line networks with technologically advanced fiber optic cable with a microwave overlay for use in our long-distance
services, it is possible that alternative technologies may be developed that are more advanced than those we currently provide. If ANATEL auctions radio frequency spectrum for use in the development of WiMax networks, we expect that we and TNL may
be required to participate in these auctions and deploy WiMax networks to remain competitive in the broadband services market. Even if we and TNL adopt new technologies in a timely manner as they are developed, the cost of such technology may exceed
the benefit to our company and TNL, and we cannot assure you that we will be able to maintain our levels of competitiveness.
Our
industry is highly regulated. Changes in laws and regulations may adversely impact our business.
Our industry is
highly regulated by ANATEL. ANATEL regulates, among other things, rates, quality of service and universal service goals, as well as competition among telecommunication service providers. Changes in laws and regulations, grants of new concessions,
authorizations or licenses or the imposition of additional universal service obligations, among other factors, may adversely affect our business, financial condition and results of operations.
In October 2008, ANATEL published items that were on its regulatory agenda, some of which were expected to be adopted during the
following two years. In furtherance of ANATEL’s regulatory agenda:
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ANATEL has proposed a General Plan on Competition Targets (
Plano Geral de Metas de Competição
), which contemplates the creation of
three entities to manage information about telecommunications networks, act as an intermediary in contracts between telecommunications providers and supervise the offering of wholesale and retail data traffic services. The proposed General Plan on
Competition Targets also addresses a variety of other matters, including criteria for the evaluation of telecommunications providers to determine which providers have significant market power, regulations applicable to the wholesale markets for
trunk lines, backhaul, access to internet backbone and interconnection services, and regulations related to partial unbundling and/or full unbundling of the local fixed-line networks of the public regime service providers. The General Plan on
Competition Targets was submitted for public consultation in July 2011 and the public consultation
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PART THREE—RISK FACTORS
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period is scheduled to end on September 8, 2011. We expect these new regulations, as they may be modified as a result of ANATEL’s further analysis, to be adopted during the first half
of 2012.
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ANATEL has proposed new regulations under which the VC-1, VC-2 and VC-3 rates would be reduced from current levels, after giving effect to an inflation
adjustment based on the IST, by 10% in 2012 and 10% in 2013. These proposed regulations also provide procedures for determining the reference value for VU-M rates in the event that providers cannot agree upon the VU-M applicable in their
interconnection agreements. These regulations were submitted for public consultation in October 2010 and the public consultation period ended on November 12, 2010. ANATEL continues to analyze these proposed regulations. We expect these new
regulations, as they may be modified as a result of ANATEL’s further analysis, to be adopted by the end of 2011.
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ANATEL has proposed new regulations under which it would modify the Factor X applicable to the determination of rate increases available to public
concessionaires providing fixed-line services. These regulations were submitted for public consultation in July 2011 and the public consultation period is scheduled to end on September 1, 2011. We expect these new regulations, as they may be
modified as a result of ANATEL’s further analysis, to be adopted in the fourth quarter of 2011.
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cannot predict when regulations regarding these matters will be adopted or whether these regulations will be adopted as proposed. Some of these regulations, if adopted, may have adverse effects on the revenues, costs and expenses, results of
operations or financial position of our company and TNL.
We cannot predict whether ANATEL, the Brazilian Ministry of
Communications (
Ministério das Comunicações
) or the Brazilian government will adopt other telecommunications sector policies in the future or the consequences of such policies on our business, the business of TNL and the
business of our competitors.
Proposed laws seeking the termination of monthly subscription fees for local fixed-line services may
adversely affect the business and financial condition of our company and TNL.
Certain legislative bills seeking to
terminate monthly subscription fees charged by local fixed-line service providers have been submitted to the Brazilian Congress and remain pending. In March 2008, a special committee was formed in the Brazilian House of Representatives to discuss
the various proposed bills on this issue. As of the date of this prospectus, no action had been taken by the committee.
Monthly subscription fees represented 26.8% and 23.3% of our gross operating revenue during the six-month period ended June 30, 2011
and the year ended December 31, 2010, respectively. Monthly subscription fees represented 24.8% and 24.0% of TNL’s gross operating revenue during the six-month period ended June 30, 2011 and the year ended December 31, 2010,
respectively. The enactment of legislation terminating the monthly subscription fees would have a material adverse effect on the results of operations of our company and TNL.
The local fixed-line and domestic long-distance concession agreements of our company and TNL are subject to periodic modifications by ANATEL and expire on December 31, 2025. Our bids for new
concessions upon the expiration of our existing concessions may not be successful.
We provide fixed-line
telecommunication services in Region II pursuant to concession agreements with the Brazilian government. In addition, TNL provides fixed-line telecommunication services in Region I pursuant to concession agreements with the Brazilian government. Our
concession agreements expire on December 31, 2025, and may be amended by the parties every five years prior to the expiration date. In connection with each five-year amendment, ANATEL has the right, following public consultations, to impose new
terms and conditions in response to changes in technology, competition in the marketplace and domestic and international economic conditions.
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PART THREE—RISK FACTORS
The obligations of our company and TNL under the concession
agreements may be subject to revision in connection with each future amendment. We cannot assure you that any future amendments will not impose requirements on our company or TNL that will require us to undertake significant capital expenditures or
will not modify the rate-setting procedures applicable to our company and TNL in a manner that will significantly reduce the net operating revenue that we generate from our respective fixed-line businesses. If the amendments to our concession
agreements have these effects, the business, financial condition and results of operations of our company and TNL could be materially adversely affected.
The concession agreements of our company and TNL will expire on December 31, 2025. We expect the Brazilian government to offer new concessions in competitive auctions prior to the expiration of our
existing concession agreements. We may participate in such auctions, but our existing fixed-line and domestic long-distance concession agreements will not entitle our company or TNL to preferential treatment in these auctions. If we do not secure
concessions for our existing service areas in any future auctions, or if such concessions are on less favorable terms than our current concessions, the business, financial condition and results of operations of our company and TNL would be
materially adversely affected.
The local fixed-line and domestic long-distance concession agreements of our company and TNL, as well as
the authorizations to provide personal mobile services of our company and TNL, contain certain obligations, and our failure to comply with these obligations may result in various fines and penalties imposed on our company and TNL by ANATEL.
The local fixed-line and domestic long-distance concession agreements that our company and TNL have entered into
contain terms reflecting the General Plan on Universal Service, the General Plan on Quality Goals (
Plano Geral de Metas de Qualidade
) and other regulations adopted by ANATEL and implemented in 2006, the terms of which could affect our
respective financial condition and results of operations. Our local fixed-line concession agreements also require us to meet certain network expansion, quality of service and modernization obligations in each of the states in Regions II and, in
addition, require TNL to meet these obligations in each of the states of Region I. In the event of noncompliance with ANATEL targets in any one of these states, ANATEL can establish a deadline for achieving the targeted level of such service, impose
penalties and, in extreme situations, terminate the applicable concession agreement for noncompliance with its quality and universal service obligations. See “Item 4. Information on the Company—Regulation of the Brazilian
Telecommunications Industry—Regulation of Fixed-Line Services” in the Brasil Telecom Annual Report and the TNL Annual Report.
On an almost weekly basis, we and TNL receive inquiries from ANATEL requiring information from us on our compliance with the various service obligations imposed on us by our concession agreements. If we
or TNL are unable to respond satisfactorily to those inquiries or comply with our service obligations under our concession agreements, ANATEL may commence administrative proceedings in connection with such noncompliance. We and TNL have received
numerous notices of the commencement of administrative proceedings from ANATEL, mostly due to our inability to achieve certain targets established in the General Plan on Quality Goals and the General Plan on Universal Service, among others. We have
recorded provisions in the amount of R$259 million as of June 30, 2011, and TNL has recorded provisions in the amount of R$883 million as of that date, in connection with fines sought to be imposed by ANATEL. Additional fines from ANATEL or
fines in excess of the provisioned amount could adversely impact our respective financial condition and results of operations. See “Item 4. Information on the Company—Regulation of the Brazilian Telecommunications Industry” in the
Brasil Telecom Annual Report and the TNL Annual Report, and “Item 8. Financial Information—Legal Proceedings—Civil Claims—Administrative Proceedings” in the Brasil Telecom Annual Report and the TNL Annual Report.
In addition, the authorizations of our company and TNL to provide personal mobile services contain certain obligations requiring us to
meet network scope and quality of service targets. If we or TNL fail to meet these
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PART THREE—RISK FACTORS
obligations, we may be fined by ANATEL until we are in full compliance with our obligations and, in extreme circumstances, our authorizations could be revoked by ANATEL. See “Item 4.
Information on the Company—Regulation of the Brazilian Telecommunications Industry—Regulation of Mobile Services—Obligations of Personal Mobile Services Providers” in the Brasil Telecom Annual Report and the TNL Annual Report.
Our company and TNL may be unable to implement our plans to expand and enhance our existing mobile networks in a timely manner or
without unanticipated costs, which could hinder or prevent the successful implementation of our respective business plans and result in revenues and net income being less than expected.
The ability of our company and TNL to achieve our strategic objectives relating to our mobile services depends in large part on the
successful, timely and cost-effective implementation of our plans to expand and enhance our mobile networks. Factors that could affect this implementation include:
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our ability to generate cash flow or to obtain future financing necessary to implement our projects;
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delays in the delivery of telecommunications equipment by our vendors;
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the failure of the telecommunications equipment supplied by our vendors to comply with the expected capabilities; and
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delays resulting from the failure of third-party suppliers or contractors to meet their obligations in a timely and cost-effective manner.
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Although we believe that the cost estimates and implementation schedules of our company and TNL are
reasonable, we cannot assure you that the actual costs or time required to complete the implementation of these projects will not substantially exceed our current estimates. Any significant cost overrun or delay could hinder or prevent the
successful implementation of our respective business plans and result in revenues and net income being less than expected.
We rely on
strategic suppliers of equipment, materials and services necessary for our operations and expansion. If these suppliers fail to provide equipment, materials or services to us on a timely basis, we could experience disruptions, which could have an
adverse effect on our revenues and results of operations.
Our company and TNL rely on few strategic suppliers of
equipment, materials and services, including Nokia Siemens Networks Serviços Ltda., Alcatel-Lucent Brasil S.A., Telemont Engenharia de Telecomunicações S.A., A.R.M. Engenharia Ltda. and Huawei do Brasil
Telecomunicações Ltda., to provide us with equipment, materials and services that we need in order to expand and to operate our respective businesses. There are a limited number of suppliers with the capability of providing the mobile
network equipment and fixed-line network platforms that our respective operations and expansion plans require or the services that we require to maintain are extensive and geographically widespread networks. In addition, because the supply of mobile
network equipment and fixed-line network platforms requires detailed supply planning and this equipment is technologically complex, it would be difficult for our company or TNL to replace the suppliers of this equipment. Suppliers of cables that we
need to extend and maintain our networks may suffer capacity constraints or difficulties in obtaining the raw materials required to manufacture these cables. As a result, we and TNL are exposed to risks associated with these suppliers, including
restrictions of production capacity for equipment and materials, availability of equipment and materials, delays in delivery of equipment, materials or services, and price increases. If these suppliers or vendors fail to provide equipment, materials
or service to our company or TNL on a timely basis or otherwise in compliance with the terms of our contracts with these suppliers, we and TNL could experience disruptions or declines in the quality of our services, which could have an adverse
effect on our respective revenues and results of operations, and we might be unable to satisfy the requirements contained in our respective concession and authorization agreements.
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PART THREE—RISK FACTORS
Our controlling shareholder, TmarPart, has control over TNL and its
controlled companies, including our company, and its interests may not be aligned with your interests.
TNL is
controlled by TmarPart, which, as of August 26, 2011, held, directly and indirectly, 56.4% of its outstanding voting shares and, at the time of the extraordinary general shareholders’ meetings called to consider the corporate reorganization
will directly and indirectly hold 68.3% of its outstanding voting shares. We are controlled by Coari, which, as of that date, held 79.6% of our outstanding voting shares. Coari is controlled by Telemar which, as of that date, held all of
Coari’s outstanding voting shares, and Telemar is controlled by TNL, which, as of that date, held 98.0% of Telemar’s outstanding voting shares.
TmarPart’s shareholders are parties to two shareholders’ agreements governing their equity interests in TmarPart. See “Item 7. Major Shareholders and Related Party Transactions—Major
Shareholders—TmarPart Shareholders’ Agreements” in the Brasil Telecom Annual Report and the TNL Annual Report. TmarPart is entitled to appoint a majority of the members of the board of directors of our company and TNL, and it has the
power to determine the decisions to be taken at our respective shareholders’ meetings on matters of our management that require the prior authorization of our shareholders, including in respect of related party transactions, corporate
restructurings and the date of payment of dividends and other capital distributions. The decisions of TmarPart and its controlling shareholders on these matters may be contrary to the expectations or preferences of holders of securities of our
company and TNL, including holders of common shares and preferred shares of our company, preferred shares of TNL, the TNL ADSs, the Brasil Telecom Common ADSs and the Brasil Telecom Preferred ADSs.
In order to expand the business of our company or TNL, we may take advantage of the consolidation of the telecommunications industry through the
acquisition of other telecommunications companies, which could adversely affect the business, results of operations and financial condition of our company or TNL.
TNL may acquire, and following the completion of the merger, we may acquire other companies in the telecommunications industry as part of our respective growth and convergence strategies. A growth
strategy that involves acquisitions may present certain risks to our business, results of operations and financial condition, such as (1) difficulties in capturing synergies in the integration process, causing the anticipated benefits of the
acquisition to be more limited than originally expected; (2) costs associated with any unforeseen antitrust restrictions; (3) failure to identify contingencies during the due diligence process; (4) uncertainty in relation to
regulatory approval; and (5) distractions from our core businesses to pursue these acquisitions and implement the integration of acquired businesses. If acquisition transactions cause our company or TNL to incur unforeseen costs due to the
factors described above, we may have to dedicate more resources than we had originally planned and eventually face substantial losses that would adversely affect the business, results of operations and financial condition of our company or TNL.
Even if we or TNL identify suitable acquisition targets, we may be unable to complete acquisitions or obtain necessary
financing to do so on satisfactory terms. Paying for acquisitions could require our company or TNL to incur or assume debt and/or contingent liabilities, amortize certain identifiable intangible assets and incur acquisition-related expenses. In
addition, we or TNL may be unable to realize all or any of the anticipated benefits from acquisitions or expansion in other related businesses because of operational factors or difficulties in integrating the acquisitions or such other related
businesses with our existing businesses, including disparate information technology systems, database systems and business processes.
We and TNL have a substantial amount of existing debt, which could restrict our respective financing and operating flexibility and have other
adverse consequences.
As of June 30, 2011, we had total consolidated debt of R$3,724 million and a ratio of total
debt to equity of 0.3:1, and TNL had total consolidated debt of R$23,942 million and a ratio of total debt to equity of 0.9:1.
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PART THREE—RISK FACTORS
We and TNL are subject to certain financial covenants that
limit our ability to incur additional debt. The existing level of indebtedness of our company and TNL and the requirements and limitations imposed by our debt instruments could adversely affect our respective financial condition or results of
operations. In particular, the terms of some of these debt instruments restrict the ability of our company and TNL, and the ability of our subsidiaries, to:
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sell or dispose of assets; and
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make certain acquisitions, mergers and consolidations.
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Furthermore, some of the debt instruments of our company and TNL include financial covenants that require us and some our subsidiaries to maintain certain specified financial ratios. Additionally, the
instruments governing a substantial portion of our indebtedness contain cross-default or cross-acceleration clauses and the occurrence of an event of default under one of these instruments could trigger an event of default under other indebtedness
or enable the creditors under other indebtedness to accelerate that indebtedness.
If our company or TNL were unable to incur
additional debt, we may be unable to invest in our respective businesses and make necessary or advisable capital expenditures, which could reduce future net operating revenue and adversely affect our profitability. In addition, cash required to
serve our existing indebtedness reduces the amount available to us to make capital expenditures.
If the growth in net
operating revenue of our company or TNL slows or declines in a significant manner, for any reason, we may not be able to continue servicing our respective debt. If we are unable to meet our debt service obligations or comply with our debt covenants,
we could be forced to renegotiate or refinance our indebtedness, seek additional equity capital or sell assets. We may be unable to obtain financing or sell assets on satisfactory terms, or at all. For more information regarding the debt instruments
of our company and TNL and our indebtedness as of December 31, 2010, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources” in the Brasil Telecom Annual Report and the TNL Annual Report, for
more information regarding our company’s debt instruments and our indebtedness as of June 30, 2011, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the First Half of 2011” in
the Brasil Telecom First Half Report, and for more information regarding TNL’s debt instruments and our indebtedness as of June 30, 2011, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations
for the First Half of 2011” in the TNL First Half Report.
Our company and TNL are subject to numerous legal and administrative
proceedings, which could adversely affect our respective businesses, results of operations and financial conditions.
Our company and TNL are subject to numerous legal and administrative proceedings. It is difficult to quantify the potential impact of
these legal and administrative proceedings. We classify our risk of loss from legal and administrative proceedings as “probable” or “possible” or “remote.” We make provisions for probable losses but do not make
provisions for possible and remote losses. As of June 30, 2011, we had provisioned R$4,477 million for probable losses relating to various tax, labor and civil legal and administrative proceedings against us, and TNL had provisioned R$6,947
million for probable losses relating to various tax, labor and civil legal and administrative proceedings against TNL in its consolidated financial statements.
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PART THREE—RISK FACTORS
As of June 30, 2011, we had claims against us of R$2,990
million in tax proceedings, R$2,732 million in labor proceedings and R$801 million in civil proceedings with a risk of loss classified as “possible” and for which we had made no provisions, and TNL had claims against it of R$17,155 million
in tax proceedings, R$3,086 million in labor proceedings and R$1,420 million in civil proceedings with a risk of loss classified as “possible” and for which TNL had made no provisions.
If we or TNL were subject to unfavorable decisions in any legal or administrative proceedings and the losses in those proceedings
significantly exceed the amount for which we have provisioned or involve proceedings for which we have made no provision, our respective results of operations and financial conditions may be materially adversely affected. For a more detailed
description of these proceedings, see “Item 8. Financial Information—Legal Proceedings” in the Brasil Telecom Annual Report and the TNL Annual Report.
Our company and TNL are subject to potential liabilities relating to our third-party service providers, which could have a material adverse effect on our respective businesses, financial conditions
and results of operations.
Our company and TNL are subject to potential liabilities relating to our third-party
service providers. Such potential liabilities may involve claims by employees of third-party service providers directly against us as if we were the direct employer of such employees, as well as claims against us for secondary liability for, among
other things, occupational hazards, wage parity or overtime pay, in the event that such third-party service providers fail to meet their obligations to their employees. Neither our company nor TNL has recorded any provision for such claims, and
significant judgments against us could have a material adverse effect on our respective businesses, financial conditions and results of operations.
Our company and TNL are subject to delinquencies of our respective accounts receivables. If we are unable to limit payment delinquencies by our customers, or if delinquent payments by our customers
increase, our respective financial conditions and results of operations could be adversely affected.
The businesses of
our company and TNL significantly depend on our customers’ ability to pay their bills and comply with their obligations to us. Our company recorded provisions for doubtful accounts in the amount of R$205 million during the six-month period
ended June 30, 2011 and R$352 million during the year ended December 31, 2010, and TNL company recorded provisions for doubtful accounts in the amount of R$499 million during the six-month period ended June 30, 2011 and R$979 million
during the year ended December 31, 2010, in each case, primarily due to subscribers’ delinquencies. As a percentage of our gross operating revenue, our provision for doubtful accounts was 2.4% as of June 30, 2011 and 2.0% as of
December 31, 2010, and TNL’s provision for doubtful accounts was 2.2% as of June 30, 2011 and 2.1% as of December 31, 2010.
ANATEL regulations prevent our company and TNL from implementing certain policies that could have the effect of reducing delinquency, such as service restrictions or limitations on the types of services
provided based on a subscriber’s credit record. If we are unable to successfully implement policies to limit subscriber delinquencies or otherwise select our customers based on their credit records, persistent subscriber delinquencies and bad
debt will continue to adversely affect our respective operating and financial results.
In addition, if the Brazilian economy
declines due to, among other factors, a reduction in the level of economic activity, depreciation of the
real
, an increase in inflation or an increase in domestic interest rates, a greater portion of our customers may not be able to pay their
bills on a timely basis, which would increase our respective provisions for doubtful accounts and adversely affect our financial conditions and results of operations.
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PART THREE—RISK FACTORS
The operations of our company and TNL depend on our ability to
maintain, upgrade and operate efficiently our respective accounting, billing, customer service, information technology and management information systems and to rely on the systems of other carriers under co-billing agreements.
Sophisticated information and processing systems are vital to the growth of our company and TNL and our ability to monitor costs, render
monthly invoices for services, process customer orders, provide customer service and achieve operating efficiencies. We cannot assure you that we will be able to operate successfully and upgrade our respective accounting, information and processing
systems or that these systems will continue to perform as expected. Our company and TNL have entered into co-billing agreements with each long-distance telecommunication service provider that is interconnected to our respective networks to include
in our invoices the long-distance services rendered by these providers, and they have agreed to include charges owed to us in their invoices. Any failure in our respective accounting, information and processing systems, or any problems with the
execution of invoicing and collection services by other carriers with whom we have co-billing agreements, could impair our ability to collect payments from customers and respond satisfactorily to customer needs, which could adversely affect our
respective businesses, financial conditions and results of operations.
Improper use of the network of our company or TNL could
adversely affect our respective costs and results of operations.
Our company and TNL incur costs associated with the
unauthorized and fraudulent use of our respective networks, including administrative and capital costs associated with detecting, monitoring and reducing the incidence of fraud. Fraud also affects interconnection costs and payments to other carriers
for non-billable fraudulent roaming. Improper use of the networks of our company and TNL could also increase our respective selling expenses if we need to increase our provisions for doubtful accounts to reflect amounts we do not believe we can
collect for improperly made calls. Any increase in the improper use of our networks in the future could materially adversely affect our respective costs and results of operations.
The operations of our company and TNL are dependent upon our respective networks. A system failure could cause delays or interruptions of service, which could cause us to suffer losses.
Damage to the networks and backup mechanisms of our company or TNL may result in service delays or interruptions and
limit our respective abilities to provide customers with reliable service over our networks. Some of the risks to our networks and infrastructure include (1) physical damage to access lines; (2) power surges or outages; (3) software
defects; (4) disruptions beyond our control; (5) breaches of security; and (6) natural disasters. The occurrence of any such event could cause interruptions in service or reduce capacity for customers, either of which could reduce our
respective gross operating revenue or cause us to incur additional expenses. In addition, the occurrence of any such event may subject our company or TNL to penalties and other sanctions imposed by ANATEL and may adversely affect our respective
businesses and results of operations.
The mobile telecommunications industry and participants in this industry, including our company
and TNL, may be harmed by reports suggesting that radio frequency emissions cause health problems and interfere with medical devices.
Media and other entities frequently suggest that the electromagnetic emissions from mobile handsets and base stations may cause health problems. If consumers harbor health-related concerns, they may be
discouraged from using mobile handsets. These concerns could have an adverse effect on the mobile telecommunications industry and, possibly, expose mobile services providers to litigation. We cannot assure you that further medical research and
studies will refute a link between the electromagnetic emissions of mobile handsets and base stations, including on frequency ranges used by our company and TNL to provide mobile services, and these health concerns. Government authorities could
increase regulation on electromagnetic emissions of mobile
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PART THREE—RISK FACTORS
handsets and base stations, which could have an adverse effect on our respective businesses, financial conditions and results of operations. The expansion of our respective networks may be
affected by these perceived risks if we experience problems in finding new sites, which in turn may delay the expansion and may affect the quality of our services. In July 2002, ANATEL enacted regulations that limit emission and exposure for fields
with frequencies between 9 kHz and 300 GHz. Although these regulations did not have a material impact on our respective businesses, new laws or regulations regarding electromagnetic emissions and exposure may be adopted that could have an adverse
effect on our respective businesses.
Risks Relating to Brazil
The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement, as well as
Brazilian political and economic conditions, could adversely impact our business, results of operations and financial condition.
Substantially all of our operations and customers are located in Brazil, except for minor services provided outside of Brazil. Accordingly, our financial condition and results of operations are
substantially dependent on Brazil’s economy. The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policy and regulations. The Brazilian government’s actions to control
inflation and implement macroeconomic policies have often involved increases in interest rates, wage and price controls, currency devaluations, blocking access to bank accounts, imposing capital controls and limits on imports, among other things. We
do not have any control over, and are unable to predict, which measures or policies the Brazilian government may adopt in the future. Our business, results of operations and financial condition may be adversely affected by changes in policies or
regulations, or by other factors such as:
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devaluations and other currency fluctuations;
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liquidity of domestic capital and lending markets;
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changes to the regulatory framework governing our industry;
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other political, diplomatic, social and economic developments in or affecting Brazil.
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Uncertainty over whether possible changes in policies or rules affecting these or other factors may contribute to economic uncertainties
in Brazil and to heightened volatility in the Brazilian securities markets and securities issued abroad by Brazilian issuers. The President of Brazil has considerable power to determine governmental policies and actions that relate to the Brazilian
economy and, consequently, affect the operations and financial performance of businesses such as our company. In November 2010, Dilma Rousseff was elected President of Brazil to succeed Luiz Inácio Lula da Silva. Ms. Rousseff’s term
began in January 2011. Although we do not believe that Ms. Rousseff will significantly alter the policies followed by her predecessor, we can offer no assurances that the policies that may be implemented by the Brazilian federal or state
governments will not adversely affect our business, results of operations and financial condition.
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PART THREE—RISK FACTORS
The global economic downturn may adversely affect economic growth in
Brazil or limit our access to the financial markets and, therefore, negatively impact our business and financial condition.
The global economic downturn and related instability in the international financial system have had, and may continue to have, a negative effect on economic growth in Brazil. The ongoing global economic
downturn has reduced the availability of liquidity and credit to fund the continuation and expansion of industrial business operations worldwide. The recent substantial losses in worldwide equity markets, including in Brazil, could lead to an
extended worldwide economic recession or depression. A prolonged slowdown in economic activity in Brazil could reduce demand for some of our services, particularly broadband services if the rate of computer sales in Brazil declines, which would
adversely affect our results of operations.
As a result of the global economic downturn, our ability to access the capital
markets or the commercial bank lending markets may be severely restricted at a time when we would like, or need, to access such markets, which could have an impact on our flexibility to react to changing economic and business conditions. The global
economic downturn could have an impact on the lenders under our existing credit facilities, on our customers or on the ability of our suppliers to meet scheduled deliveries, causing them to fail to meet their obligations to us. If the global
economic downturn deepens further, it could have an adverse effect on the demand for our services and our ability to fund our planned growth.
Depreciation of the real may lead to substantial losses on our liabilities denominated in or indexed to foreign currencies.
During the four decades prior to 1999, the Central Bank periodically devalued the Brazilian currency. Throughout this period, the
Brazilian government implemented various economic plans and used various exchange rate policies, including sudden devaluations (such as daily and monthly adjustments), exchange controls, dual exchange rate markets and a floating exchange rate
system. Since 1999, exchange rates have been set by the market. The exchange rate between the
real
and the U.S. dollar has varied significantly in recent years. For example, the
real
/U.S. dollar exchange rate increased from R$1.955 per
U.S. dollar on December 31, 2000 to R$3.533 on December 31, 2002. The
real
appreciated against the U.S. dollar by 11.8% in 2005, 8.7% in 2006 and 17.1% in 2007. In 2008, primarily as a result of the international financial crisis,
the
real
depreciated by 31.9% against the U.S. dollar and prompted foreign investors to remove billions of
reais
from the BM&FBOVESPA. The
real
appreciated against the U.S. dollar by 25.5% during 2009, by 4.3% during 2010,
and 6.3% during the six-month period ended June 30, 2011.
As of June 30, 2011, only R$2 million of our financial
indebtedness was denominated in a foreign currency. However, a significant amount of TNL’s financial liabilities are denominated in or indexed to foreign currencies, primarily U.S. dollars, Japanese yen and euros. As of June 30, 2011,
R$7,821 million, or 32.7% of TNL’s financial indebtedness was denominated in a foreign currency. When the real depreciates against foreign currencies, TNL incurs losses on its liabilities denominated in or indexed to foreign currencies, such as
its U.S. dollar-denominated long-term debt and foreign currency loans, and TNL incurs gains on its monetary assets denominated in or indexed to foreign currencies, as the liabilities and assets are translated into reais. If significant depreciation
of the real were to occur when the value of such liabilities significantly exceeds the value of such assets, including any financial instruments entered into for hedging purposes, TNL could incur significant losses, even if the value of those assets
and liabilities has not changed in their original currency. In addition, a significant depreciation in the real could adversely affect TNL’s ability to meet certain of its payment obligations. A failure to meet TNL’s payment obligations
could trigger a default under certain financial covenants in its debt instruments, which could have a material adverse effect on its business and results of operations. Additionally, TNL currently has currency swaps and non-deliverable forwards in
place for a portion of its foreign currency debt. If the cost of currency swap instruments increases substantially, TNL may be unable to maintain its hedge positions, resulting in an increased foreign currency exposure which could in turn lead to
substantial foreign exchange losses.
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PART THREE—RISK FACTORS
In addition, a portion of the capital expenditures of our
company and TNL require us to acquire assets at prices denominated in or linked to foreign currencies, some of which are financed by liabilities denominated in foreign currencies, principally the U.S. dollar. We generally do not hedge against these
risks. To the extent that the value of the
real
decreases relative to the U.S. dollar, it becomes more costly for us to purchase these assets, which could adversely affect our business and financial performance.
Depreciation of the
real
relative to the U.S. dollar could create additional inflationary pressures in Brazil by increasing the
price of imported products and requiring recessionary government policies, including tighter monetary policy. On the other hand, appreciation of the
real
against the U.S. dollar may lead to a deterioration of the country’s current
account and balance of payments, as well as to a dampening of export-driven growth.
If Brazil experiences substantial inflation in the
future, our margins and our ability to access foreign financial markets may be reduced. Government measures to curb inflation may have adverse effects on the Brazilian economy, the Brazilian securities market and our business and results of
operations.
Brazil has, in the past, experienced extremely high rates of inflation, with annual rates of inflation
reaching as high as 2,708% in 1993 and 1,093% in 1994. Inflation and some of the Brazilian government’s measures taken in an attempt to curb inflation have had significant negative effects on the Brazilian economy.
Since the introduction of the
real
in 1994, Brazil’s inflation rate has been substantially lower than in previous periods.
However, actions taken in an effort to control inflation, coupled with speculation about possible future governmental actions, have contributed to economic uncertainty in Brazil and heightened volatility in the Brazilian securities market. More
recently, Brazil’s rates of inflation, as measured by the General Market Price Index — Internal Availability (
Índice Geral de Preços — Disponibilidade Interna
), or IGP-DI, published by Fundação
Getúlio Vargas, or FGV, were 3.8% in 2006, 7.9% in 2007, 9.1% in 2008, (1.4)% in 2009, 11.3% in 2010 and 8.7% during the 12-month period ended June 30, 2011. According to the Broad Consumer Price Index (
Índice Nacional de
Preços ao Consumidor Ampliado
), or IPCA, published by the Brazilian Institute for Geography and Statistics (
Instituto Brasileiro de Geografia e Estatística
), or IBGE, the Brazilian consumer price inflation rates were 3.1% in
2006, 4.5% in 2007, 5.9% in 2008, 4.3% in 2009, 5.9% in 2010 and 6.7% during the 12-month period ended June 30, 2011.
If
Brazil experiences substantial inflation in the future, our costs may increase and our operating and net margins may decrease. Although ANATEL regulations provide for annual price increases for most of our services, such increases are linked to
inflation indices, discounted by increases in our productivity. During periods of rapid increases in inflation, the price increases for our services may not be sufficient to cover our additional costs and we may be adversely affected by the lag in
time between the incurrence of increased costs and the receipt of revenues resulting from the annual price increases. Inflationary pressures may also curtail our ability to access foreign financial markets and may lead to further government
intervention in the economy, including the introduction of government policies that may adversely affect the overall performance of the Brazilian economy.
Fluctuations in interest rates could increase the cost of servicing our debt and negatively affect our overall financial performance.
Our financial expenses are affected by changes in the interest rates that apply to our floating rate debt. As of June 30, 2011, we
had, among other debt obligations, R$2,204 million of loans and financing and debentures that were subject to the
Taxa de Juros de Longo Prazo
, or TJLP, a long-term interest rate, R$729 million of loans and financing and debentures that were
subject to the Interbank Certificate of Deposit (
Certificado de Depósito Interbancário
), or CDI, rate, an interbank rate, and R$583 million of loans and financing that were subject to the IPCA. As of June 30, 2011, TNL had,
among other debt obligations, R$7,713 million of loans and financing and
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debentures that were subject to the CDI rate, R$5,402 million of loans and financing and debentures that were subject to the TJLP, R$2,115 million of loans and financing that were subject to the
IPCA, R$2,392 million of loans and financing that were subject to LIBOR, and R$621 million of loans and financing that were subject to Japanese Yen LIBOR.
The TJLP includes an inflation factor and is determined quarterly by the National Monetary Council (
Conselho Monetário Nacional
). In particular, the TJLP and the CDI rate have fluctuated
significantly in the past in response to the expansion or contraction of the Brazilian economy, inflation, Brazilian government policies and other factors. For example, the CDI increased from 8.55% per annum as of December 31, 2009 to
10.64% per annum as of December 31, 2010. A significant increase in any of these interest rates, particularly the CDI rate, could adversely affect our financial expenses and negatively affect our overall financial performance.
The market value of securities issued by Brazilian companies is influenced by the perception of risk in Brazil and other emerging market countries,
which may have a negative effect on the trading price of common shares and preferred shares of Brasil Telecom and Brasil Telecom ADSs and may restrict our access to international capital markets.
Economic and market conditions in other emerging market countries, especially those in Latin America, may influence the market for
securities issued by Brazilian companies. Investors’ reactions to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers. Adverse economic conditions in other emerging market
countries have at times resulted in significant outflows of funds from Brazil. In 2008, certain Brazilian and Mexican companies announced significant losses in connection with currency derivatives as a result of the depreciation of the Mexican peso
and the
real
against the U.S. dollar, respectively. As a result, a number of these companies have suffered financial distress and have sought protection under various bankruptcy regimes. In addition, in October 2008, the Argentine government
nationalized the Argentine private pension funds. Crises in other emerging countries or the economic policies of other countries, in particular the United States, may adversely affect investors’ demand for securities issued by Brazilian
companies, including common shares and preferred shares of Brasil Telecom and Brasil Telecom ADSs. Any of these factors could adversely affect the market price of common shares and preferred shares of Brasil Telecom and Brasil Telecom ADSs and
impede our ability to access the international capital markets and finance our operations in the future on terms acceptable to us or at all.
Restrictions on the movement of capital out of Brazil may impair our ability to service certain debt obligations.
Brazilian law provides that whenever there exists, or there is a serious risk of, a material imbalance in Brazil’s balance of
payments, the Brazilian government may impose restrictions for a limited period of time on the remittance to foreign investors of the proceeds of their investments in Brazil as well as on the conversion of the
real
into foreign currencies.
The Brazilian government imposed such a restriction on remittances for approximately six months in 1989 and early 1990. The Brazilian government may in the future restrict companies from paying amounts denominated in foreign currency or require that
any such payment be made in
reais
. Many factors could affect the likelihood of the Brazilian government imposing such exchange control restrictions, including the extent of Brazil’s foreign currency reserves, the availability of
sufficient foreign exchange on the date a payment is due, the size of Brazil’s debt service burden relative to the economy as a whole, and political constraints to which Brazil may be subject. There can be no certainty that the Brazilian
government will not take such measures in the future.
Although our foreign-currency denominated debt represented less than
0.1% of our indebtedness on a consolidated basis as of June 30, 2011, TNL’s foreign-currency denominated debt represented 32.7% of its indebtedness on a consolidated basis as of that date. A more restrictive policy could increase the cost
of servicing, and thereby reduce TNL’s ability to pay, its foreign currency-denominated debt obligations and other
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PART THREE—RISK FACTORS
liabilities. If we or TNL fail to make payments under any of these obligations, we will be in default under those obligations, which could reduce our liquidity as well as the market price of our
respective shares and ADSs.
In addition, a more restrictive policy could hinder or prevent the Brazilian custodian of the
shares underlying Brasil Telecom ADSs or holders who have exchanged Brasil Telecom ADSs for the underlying shares from converting dividends, distributions or the proceeds from any sale of such shares into U.S. dollars and remitting such U.S. dollars
abroad. In such an event, the Brazilian custodian for the shares of Brasil Telecom will hold the
reais
that it cannot convert for the account of holders of Brasil Telecom ADSs who have not been paid. Neither the custodian nor The Bank of New
York Mellon, as depositary of our ADS program, or the depositary, will be required to invest the
reais
or be liable for any interest.
Risks Relating to Our Common Shares and Preferred Shares and Brasil Telecom ADSs
Holders of common shares or preferred shares of Brasil Telecom or Brasil Telecom ADSs may not receive any dividends or interest on shareholders’ equity.
According to our by-laws, we must generally pay our shareholders at least 25% of our annual net income as dividends or interest on
shareholders’ equity, as calculated and adjusted under Brazilian GAAP. This adjusted net income may be capitalized, used to absorb losses or otherwise retained as allowed under Brazilian GAAP and may not be available to be paid as dividends or
interest on shareholders’ equity. Holders of common shares of Brasil Telecom or Brasil Telecom Common ADSs, may not receive any dividends or interest on shareholders’ equity in any given year due to the dividend preference of the preferred
shares of Brasil Telecom. Additionally, the Brazilian Corporation Law allows a publicly traded company like ours to suspend the mandatory distribution of dividends in any particular year if our board of directors informs our shareholders that such
distributions would be inadvisable in view of our financial condition or cash availability. Holders of preferred shares of Brasil Telecom or Brasil Telecom Preferred ADSs may not receive any dividends or interest on shareholders’ equity in any
given year if our board of directors makes such a determination or if our operations fail to generate net income.
Brasil Telecom
preferred shares and Brasil Telecom Preferred ADSs have limited voting rights and are not entitled to vote to approve corporate transactions, including mergers or consolidations of our company with other companies, or the declaration of dividends.
Under the Brazilian Corporation Law and our by-laws, holders of preferred shares of Brasil Telecom and, consequently,
Brasil Telecom Preferred ADSs, are not entitled to vote at meetings of our shareholders, except in very limited circumstances. These limited circumstances directly relate to key rights of the holders of preferred shares, such as modifying basic
terms of the preferred shares of Brasil Telecom or creating a new class of preferred shares with superior rights. Holders of preferred shares without voting rights are entitled to elect one member and his or her respective alternate to our board of
directors and our fiscal council. Holders of preferred shares of Brasil Telecom and Brasil Telecom Preferred ADSs are not entitled to vote to approve corporate transactions, including mergers or consolidations of our company with other companies, or
the declaration of dividends. See “Part Six—Shareholder Rights—Description of Brasil Telecom Capital Stock—Voting Rights.”
Holders of Brasil Telecom ADSs may find it difficult to exercise their voting rights at our shareholders’ meetings.
Under Brazilian law, only shareholders registered as such in our corporate books may attend our shareholders’ meetings. All common
shares and preferred shares underlying Brasil Telecom ADSs are registered in the name of the depositary. Holders of Brasil Telecom ADSs may exercise the voting rights with respect to
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PART THREE—RISK FACTORS
common shares of Brasil Telecom and the limited voting rights with respect to preferred shares of Brasil Telecom represented by Brasil Telecom ADSs only in accordance with the deposit agreements
relating to Brasil Telecom ADSs. There are practical limitations upon the ability of the ADS holders to exercise their voting rights due to the additional steps involved in communicating with ADS holders. For example, we are required to publish a
notice of our shareholders’ meetings in certain newspapers in Brazil. To the extent that holders of common shares or preferred shares of our company are entitled to vote at a shareholders’ meeting, they will be able to exercise their
voting rights by attending the meeting in person or voting by proxy. By contrast, holders of the ADSs will receive notice of a shareholders’ meeting by mail from the depositary following our notice to the depositary requesting the depositary to
inform ADS holders of the shareholders’ meeting. To exercise their voting rights, ADS holders must instruct the depositary on a timely basis. This noticed voting process will take longer for holders of Brasil Telecom ADSs than for holders of
common shares or preferred shares of Brasil Telecom. If the depositary fails to receive timely voting instructions for all or part of Brasil Telecom ADSs, the depositary will assume that the holders of those ADSs are instructing it to give a
discretionary proxy to a person designated by us to vote their ADSs, except in limited circumstances.
In the circumstances in
which holders of Brasil Telecom ADSs have voting rights, they may not receive the voting materials in time to instruct the depositary to vote common shares or preferred shares of Brasil Telecom underlying their ADSs. In addition, the depositary and
its agents are not responsible for failing to carry out voting instructions of the holders of Brasil Telecom ADSs or for the manner of carrying out those voting instructions. Accordingly, holders of Brasil Telecom ADSs may not be able to exercise
voting rights, and they will have no recourse if the common shares or preferred shares underlying their ADSs are not voted as requested.
Holders of common shares or preferred shares of Brasil Telecom or Brasil Telecom ADSs in the United States may not be entitled to the same
preemptive rights as Brazilian shareholders have, pursuant to Brazilian legislation, in the subscription of shares resulting from capital increases made by us.
Under Brazilian law, if we issue new shares in exchange for cash or assets as part of a capital increase, subject to certain exceptions, we must grant our shareholders preemptive rights at the time of the
subscription of shares, corresponding to their respective interest in the share capital of Brasil Telecom, allowing them to maintain their existing shareholding percentage. We may not legally be permitted to allow holders of common shares or
preferred shares of Brasil Telecom or Brasil Telecom ADSs in the United States to exercise any preemptive rights in any future capital increase unless (1) we file a registration statement for an offering of shares resulting from the capital
increase with the U.S. Securities and Exchange Commission, or SEC, or (2) the offering of shares resulting from the capital increase qualifies for an exemption from the registration requirements of the Securities Act. At the time of any future
capital increase, we will evaluate the costs and potential liabilities associated with filing a registration statement for an offering of shares with the SEC and any other factors that we consider important in determining whether to file such a
registration statement. We cannot assure the holders of common shares or preferred shares of Brasil Telecom or Brasil Telecom ADSs in the United States that we will file a registration statement with the SEC to allow them to participate in any of
our capital increases. As a result, the equity interest of such holders in our company may be diluted.
If holders of Brasil Telecom
ADSs exchange them for common shares or preferred shares, they may risk temporarily losing, or being limited in, the ability to remit foreign currency abroad and certain Brazilian tax advantages.
The Brazilian custodian for the common shares and preferred shares underlying Brasil Telecom ADSs must obtain an electronic registration
number with the Central Bank to allow the depositary to remit U.S. dollars abroad. ADS holders benefit from the electronic certificate of foreign capital registration from the Central Bank obtained by the custodian for the depositary, which
permits it to convert dividends and other distributions with respect to the common shares or preferred shares into U.S. dollars and remit the proceeds of such conversion
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PART THREE—RISK FACTORS
abroad. If holders of Brasil Telecom ADSs decide to exchange them for the underlying common shares or preferred shares, they will only be entitled to rely on the custodian’s certificate of
registration with the Central Bank for five business days after the date of the exchange. Thereafter, they will be unable to remit U.S. dollars abroad unless they obtain a new electronic certificate of foreign capital registration in connection
with the common shares or preferred shares, which may result in expenses and may cause delays in receiving distributions. See “Part Six—Shareholder Rights—Exchange Controls.”
Also, if holders of Brasil Telecom ADSs that exchange Brasil Telecom ADSs for common shares or preferred shares of Brasil Telecom do not
qualify under the foreign investment regulations, they will generally be subject to less favorable tax treatment of dividends and distribution on, and the proceeds from any sale of, common shares or preferred shares of Brasil Telecom. See “Part
Six—Shareholder Rights—Exchange Controls” and “Part Five—The Merger—Material Tax Considerations—Brazilian Tax Considerations.”
Holders of Brasil Telecom ADSs may face difficulties in protecting their interests because, as a Brazilian company, we are subject to different corporate rules and regulations and our shareholders
may have fewer and less well-defined rights.
Holders of Brasil Telecom ADSs are not direct shareholders of our company
and are unable to enforce the rights of shareholders under our by-laws and the Brazilian Corporation Law.
Our corporate
affairs are governed by our by-laws and the Brazilian Corporation Law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States, such as the State of Delaware or New York, or elsewhere
outside Brazil. Even if a holder of Brasil Telecom ADSs surrenders its ADSs and becomes a direct shareholder, its rights as a holder of common shares or preferred shares of Brasil Telecom under the Brazilian Corporation Law to protect its interests
relative to actions by our board of directors may be fewer and less well-defined than under the laws of those other jurisdictions.
Although insider trading and price manipulation are crimes under Brazilian law, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or the markets in
some other jurisdictions. In addition, rules and policies against self-dealing or for preserving shareholder interests may be less well-defined and enforced in Brazil than in the United States and certain other countries, which may put holders of
common shares or preferred shares of Brasil Telecom or Brasil Telecom ADSs at a potential disadvantage. Corporate disclosures also may be less complete or informative than those of a public company in the United States or in certain other countries.
We are exempt from some of the corporate governance requirements of the New York Stock Exchange.
We are a foreign private issuer, as defined by the SEC for purposes of the Exchange Act. As a result, for so long as we remain a foreign
private issuer, we will be exempt from, and you will not be provided with the benefits of, some of the corporate governance requirements of The New York Stock Exchange, or the NYSE. We are permitted to follow practice in Brazil in lieu of the
provisions of the NYSE’s corporate governance rules, except that:
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we are required to have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act;
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we are required to disclose any significant ways in which our corporate governance practices differ from those followed by domestic companies under
NYSE listing standards;
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PART THREE—RISK FACTORS
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our chief executive officer is obligated to promptly notify the NYSE in writing after any of our executive officers becomes aware of any non-compliance
with any applicable provisions of the NYSE corporate governance rules; and
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we must submit an executed written affirmation annually to the NYSE. In addition, we must submit an interim written affirmation as and when required by
the interim written affirmation form specified by the NYSE.
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The standards applicable to us are considerably
different than the standards applied to U.S. domestic issuers. Although Rule 10A-3 under the Exchange Act generally requires that a listed company have an audit committee of its board of directors composed solely of independent directors, as a
foreign private issuer, we are relying on a general exemption from this requirement that is available to us as a result of the features of Brazilian law applicable to our fiscal council. In addition, we are not required to, among other things:
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have a majority of the board be independent;
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have a compensation committee or a nominating or corporate governance committee of our board of directors;
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have regularly scheduled executive sessions with only non-management directors; or
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have at least one executive session of solely independent directors each year.
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We intend to rely on some or all of these exemptions. As a result, you will not be provided with the benefits of certain corporate
governance requirements of the NYSE.
Holders of Brasil Telecom ADSs may face difficulties in serving process on or enforcing judgments
against us and other persons.
We are organized under the laws of Brazil, and all of the members of our board of
directors, our executive officers and some of the experts named in this prospectus reside in Brazil or elsewhere outside the United States. The vast majority of our assets are located outside the United States and all or a substantial portion of the
assets of these other persons may be located outside the United States.
As a result, it may not be possible for holders of
Brasil Telecom ADSs to effect service of process upon us or these other persons within the United States or other jurisdictions outside Brazil or to enforce against us or these other persons judgments obtained in the United States or other
jurisdictions outside Brazil. In addition, because substantially all of our assets and all of our directors and officers reside outside the United States, any judgment obtained in the United States against us or any of our directors or officers may
not be collectible within the United States. Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain conditions are met, holders may face greater difficulties in
protecting their interests in the case of actions by us or our board of directors or executive officers than would shareholders of a U.S. corporation.
Brazilian tax laws may have an adverse impact on the taxes applicable to the disposition of common shares and preferred shares of Brasil Telecom and Brasil Telecom ADSs.
According to Law No. 10,833, enacted on December 29, 2003, if a nonresident of Brazil disposes of assets located in Brazil, the
transaction will be subject to taxation in Brazil, even if such disposition occurs outside Brazil or if such disposition is made to another nonresident. Dispositions of Brasil Telecom ADSs between nonresidents, however, are currently not subject to
taxation in Brazil. Nevertheless, in the event that the concept of “disposition of assets” is interpreted to include the disposition between nonresidents of assets located outside Brazil, this tax law could result in the imposition of
withholding taxes in the event of a disposition of Brasil Telecom ADSs made between nonresidents of Brazil. Due to the fact that as of the date of this prospectus Law
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PART THREE—RISK FACTORS
No. 10,833/2003 has no judicial guidance as to its application, we are unable to predict whether an interpretation applying such tax laws to dispositions of Brasil Telecom ADSs between
nonresidents could ultimately prevail in Brazilian courts. See “Part Five—The Merger—Material Tax Considerations—Brazilian Tax Considerations.”
The relative volatility and illiquidity of the Brazilian securities markets may adversely affect holders of common shares and preferred shares of Brasil Telecom and Brasil Telecom ADSs.
The Brazilian securities markets are substantially smaller, less liquid and more volatile than major securities
markets in the United States. The BM&FBOVESPA, which is the principal Brazilian stock exchange, had a market capitalization of R$2,546 billion (US$1,528 billion) as of December 31, 2010 and an average daily trading volume of R$5.0 billion
(US$3.0 billion) for 2010. In comparison, aggregate market capitalization of the companies (including U.S. and non-U.S. companies) listed on the NYSE was US$14.7 trillion as of December 31, 2010 and the NYSE recorded an average daily trading
volume of US$70.9 billion for 2010. There is also significantly greater concentration in the Brazilian securities markets. The ten largest companies in terms of market capitalization represented approximately 56% of the aggregate market
capitalization of the BM&FBOVESPA as of December 31, 2010. The ten most widely traded stocks in terms of trading volume accounted for approximately 53% of all shares traded on the BM&FBOVESPA in 2010. These market characteristics may
substantially limit the ability of holders of Brasil Telecom ADSs to sell the preferred shares underlying Brasil Telecom ADSs at a price and at a time when they wish to do so and, as a result, could negatively impact the market price of Brasil
Telecom ADSs themselves.
The imposition of IOF taxes may indirectly influence the price and volatility of Brasil Telecom ADSs, common
shares and preferred shares.
Brazilian law imposes the Tax on Foreign Exchange Transactions, or the IOF/Exchange Tax,
on the conversion of
reais
into foreign currency and on the conversion of foreign currency into
reais
. Brazilian law also imposes the Tax on Transactions Involving Bonds and Securities, or the IOF/Securities Tax, due on transactions
involving bonds and securities, including those carried out on a Brazilian stock exchange.
In October 2009, the Brazilian
government imposed the IOF/Exchange Tax at a rate of 2.0% in connection with inflows of funds related to investments carried out by non-Brazilian investors in the Brazilian financial and capital markets with the objective of slowing the pace of
speculative inflows of foreign capital into the Brazilian market and the appreciation of the
real
against the U.S. dollar. In November 2009, the Brazilian government also established that the rate of the IOF/Securities Tax applicable to the
transfer of shares with the specific purpose of enabling the issuance of ADSs would be 1.5% with the objective of correcting an asymmetry created by the imposition of the IOF/Exchange Tax.
The imposition of these taxes may discourage foreign investment in shares of Brazilian companies, including our company, due to higher
transaction costs, and may negatively impact the price and volatility of Brasil Telecom ADSs, common shares and preferred shares on the NYSE and the BM&FBOVESPA.
Cautionary Statement Concerning Forward-Looking Statements
This prospectus contains forward-looking statements. Some of the matters discussed concerning our business operations and financial performance include forward-looking statements within the meaning of the
Securities Act or the U.S. Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act.
Statements
that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates”
and similar expressions are forward-looking statements. Although we believe that these forward-looking statements are based upon reasonable assumptions, these statements are subject to several risks and uncertainties and are made in light of
information currently available to us.
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PART THREE—RISK FACTORS
Our forward-looking statements may be influenced by factors,
including the following:
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competition in the Brazilian telecommunications sector;
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our management’s current expectations and estimates concerning our future financial performance, financing plans and programs;
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the Brazilian government’s telecommunications policies that affect the telecommunications industry and our business in general, including issues
relating to the remuneration for the use of our network, and changes in or developments of ANATEL regulations applicable to us;
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the cost and availability of financing;
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the general level of demand for, and changes in the market prices of, our services;
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our ability to implement our corporate strategies in order to increase our average revenue per user;
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political, regulatory and economic conditions in Brazil and the specific Brazilian states in which we operate;
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inflation and fluctuations in exchange rates;
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legal and administrative proceedings to which we are or become a party; and
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other factors identified or discussed under “Part Three—Risk Factors” of this prospectus.
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Our forward-looking statements are not guarantees of future performance, and our actual results or other developments may differ
materially from the expectations expressed in the forward-looking statements. As for forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainty of
estimates, forecasts and projections. Because of these uncertainties, potential investors should not rely on these forward-looking statements.
We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.
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PART FOUR—RECENT DEVELOPMENTS
Developments in 2011 Relating to Brasil Telecom and TNL
Portugal Telecom Alliance
On March 28, 2011:
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Bratel Brasil S.A., or Bratel, a wholly-owned indirect subsidiary of Portugal Telecom SGPS S.A., or Portugal Telecom, purchased an aggregate of
261,631,051 common shares of TmarPart, representing 9.6% of the outstanding common shares of TmarPart, from BNDES Participações S.A., or BNDESPar, PREVI—Caixa de Previdência dos Funcionários do Banco do Brasil, or
PREVI, PETROS – Fundação Petrobrás de Seguridade Social, or PETROS, and FUNCEF – Fundação dos Economiários Federais, or FUNCEF.
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TmarPart conducted a capital increase in which it issued 186,664,449 common shares, in which (1) Bratel purchased an aggregate of 91,225,537
common shares of TmarPart, representing 3.1% of the outstanding common shares of TmarPart, (2) AG Telecom Participações S.A., or AG Telecom, and its subsidiary Luxemburgo Participações S.A. purchased an aggregate of
36,784,491 common shares of TmarPart, representing 1.3% of the outstanding common shares of TmarPart, (3) LF Tel S.A., or LF Tel, purchased an aggregate of 36,784,491 common shares of TmarPart, representing 1.3% of the outstanding common shares
of TmarPart, and (4) Fundação Atlântico de Seguridade Social, or FASS, purchased an aggregate of 21,869,930 common shares of TmarPart, representing 0.7% of the outstanding common shares of TmarPart.
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TNL conducted a capital increase in which it issued 56,417,086 common shares at an issue price of R$38.5462 per share and 28,409,175 preferred shares
at an issue price of R$28.2634 per share. The aggregate proceeds to TNL from this capital increase were R$2,978 million. In this capital increase, TmarPart and its wholly-owned subsidiary Valverde Participações S.A. purchased
35,309,502 common shares of TNL and Bratel purchased an aggregate of 20,752,270 common shares of TNL and 28,298,549 preferred shares of TNL.
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Telemar conducted a capital increase in which it issued 46,969,121 common shares at an issue price of R$63.7038 per share and 58,696,856 class A
preferred shares at an issue price of R$50.7010 per share. The aggregate proceeds to Telemar from this capital increase were R$5,969 million, of which R$2,978 million represented the purchase price for the shares of Telemar subscribed to by TNL. In
this capital increase, TNL purchased 46,743,149 common shares of Telemar and Bratel purchased an aggregate of 32,475,534 class A preferred shares of Telemar.
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Upon the completion of these transactions, certain amendments to the shareholders’ agreements governing the rights of the shareholders of TmarPart that had been entered into on January 25, 2011
became effective. For more information regarding these shareholders’ agreements as amended, see “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders—TmarPart Shareholders’ Agreements” in the TNL
Annual Report.
The objective of the Portugal Telecom Alliance is to develop a global telecommunications platform that will
allow for cooperation in diverse areas, aiming, among other things, to share best practices, achieve economies of scale, implement research and development initiatives, develop technologies, expand the parties’ international presence,
particularly in Latin America and Africa, diversify services, maximize synergies and reduce costs, seeking always to offer better services and care to customers of both groups and to create value for their shareholders.
TNL intends to use the proceeds from its capital increase and Telemar’s capital increase to purchase up to 10% of the outstanding
shares of Portugal Telecom, to reduce its net debt, to facilitate its operational
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PART FOUR—RECENT DEVELOPMENTS
development, and to pursue market opportunities outside of Brazil. As of August 26, 2011, Telemar has purchased 64,557,566 shares of Portugal Telecom, representing 7.2% of its outstanding shares,
for an aggregate purchase price of R$1,207 million in transactions carried out through brokers that it has engaged for this purpose. In addition, Telemar has used a portion of its capital increase to prepay R$2,000 million aggregate principal amount
borrowed under an unsecured line of credit in November 2009.
In October 2010, ANATEL approved the Portugal Telecom Alliance
without conditions, other than a requirement that we pay all pending administrative fines, amounting to approximately R$228 million, regardless of the procedural posture of the proceedings which we had instituted to contest these fines. TNL sought
and has been granted injunctive relief which has permitted TNL to make judicial deposits of these amounts while preserving its rights to contest these fines. ANATEL has appealed these injunctions, which appeals remain pending.
Under Brazilian antitrust regulations, ANATEL will submit the Portugal Telecom Alliance to CADE for final approval. Brazilian law
permitted TNL to consummate this transaction prior to receiving the final approval from CADE. CADE will determine whether this transaction negatively impacts competitive conditions in the markets in which TNL competes or adversely affects consumers
in these markets.
Management Changes
On May 26, 2011, the board of directors of Brasil Telecom elected Maxim Medvedovsky and Tarso Rebello Dias to serve on the board of
executive officers of Brasil Telecom to replace João Francisco da Silveira Neto who resigned as a member of the board of executive officers of Brasil Telecom on April 15, 2011 and Marco Norci Schroeder, who resigned as a member of the
board of executive officers of Brasil Telecom on May 26, 2011.
On June 30, 2011, Luiz Eduardo Falco Pires
Corrêa resigned as chief executive officer of TNL and Brasil Telecom and the boards of directors of TNL and Brasil Telecom elected José Mauro Mettrau Carneiro da Cunha to serve as interim chief executive officer. On August 1, 2011
the boards of directors of TNL and Brasil Telecom elected Francisco Tosta Valim Filho as chief executive officer of TNL and Brasil Telecom.
On July 4, 2011, Francisco Aurélio Sampaio Santiago resigned as a member of the board of directors of Brasil Telecom and as an executive officer of TNL, and, as of the date of this prospectus,
the shareholders of Brasil Telecom have not elected a replacement member of the board of directors of Brasil Telecom, and the board of directors of TNL has not elected a replacement executive officer of TNL. Pending the election of a replacement for
Mr. Santiago as a member of the board of directors of Brasil Telecom, his alternate, Júlio César Fonseca, will perform his duties as a member of the board of directors of Brasil Telecom.
On August 25, 2011, Otávio Marques de Azevedo resigned as a member of the board of directors of TNL and Lucio Otávio
Ferreira resigned as an alternate member of the board of directors of TNL. On that date, the board of directors of TNL elected Armando Galhardo Nunes Guerra Junior as a member of the board of directors of TNL and Paulo Márcio de Oliveira
Monteiro as an alternate member of the board of directors of TNL.
Amendments to Concession Agreements
Amendments to Local Fixed-Line Concession Agreements
On June 30, 2011, Brasil Telecom and Telemar each entered into a concession agreement with ANATEL that governs its respective
concessions to provide fixed-line services. These concession agreements consolidated Brasil Telecom’s previously existing concession agreements for the Federal District and each of the states of Region II in a single concession agreement and
consolidated Telemar’s previously existing concession agreements for each of the states of Region I in a single concession agreement. In addition to the terms of the
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PART FOUR—RECENT DEVELOPMENTS
existing obligations of Brasil Telecom and Telemar under their previously existing local fixed-line concession agreements, the new concession agreements:
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remove the restrictions that had been in the local fixed-line concession agreements of Brasil Telecom and Telemar which had prohibited them from
offering subscription television services, such as IP TV, over their fixed-line networks;
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expand the scope of revenue generating activities that Brasil Telecom and Telemar must use to calculate the biannual fees owed by them in connection
with their concession agreements, while allowing them to apply the amount of such fees to finance the expanded service obligations created by the amended General Plan on Universal Service in lieu of making payment to ANATEL;
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requires Brasil Telecom and Telemar to implement electronic billing systems;
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establishes new conditions under which ANATEL may access information from Brasil Telecom and Telemar;
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removes the grace period during which Brasil Telecom and Telemar could repair systemic service interruptions without incurring fines; and
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requires Brasil Telecom and Telemar to rescind their contracts if ANATEL determines they are contrary to any rules or regulations, economic order or
public interest.
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See “Item 4. Information on the Company—Concessions, Authorizations and
Licenses—Fixed-Line Services Concession Agreements” in the Brasil Telecom Annual Report and the TNL Annual Report for more information about the existing obligations of Brasil Telecom and Telemar under their local fixed-line concession
agreements.
Amendments to Domestic Long-Distance Concession Agreements
On June 30, 2011, Brasil Telecom and Telemar each entered into a concession agreement with ANATEL that governs its respective
concessions to provide domestic long-distance services. These concession agreements consolidated Brasil Telecom’s previously existing concession agreements for the Federal District and each of the states of Region II in a single concession
agreement and consolidated Telemar’s previously existing concession agreements for each of the states of Region I in a single concession agreement. In addition to the terms of the existing obligations of Brasil Telecom and Telemar under their
previously existing domestic long-distance concession agreements, the new concession agreements:
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expand the scope of revenue generating activities that Brasil Telecom and Telemar must use to calculate the biannual fees owed by them in connection
with their concession agreements;
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requires Brasil Telecom and Telemar to implement an electronic billing systems;
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establishes new conditions under which ANATEL may access information from Brasil Telecom and Telemar;
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removes the grace period during which Brasil Telecom and Telemar could repair systemic service interruptions without incurring fines; and
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requires Brasil Telecom and Telemar to rescind their contracts if ANATEL determines they are contrary to any rules or regulations, economic order or
public interest.
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See “Item 4. Information on the Company—Concessions, Authorizations and
Licenses— Domestic Long-Distance Services Concession Agreements” in the Brasil Telecom Annual Report and the TNL Annual Report for more information about the existing obligations of Brasil Telecom and Telemar under their domestic
long-distance concession agreements.
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PART FOUR—RECENT DEVELOPMENTS
Term of Commitment (
Termo de Compromisso
)
On June 30, 2011, TNL entered into a Term of Commitment (
Termo de Compromisso
) with ANATEL and the Ministry of Communications
to formalize the voluntary commitment of Brasil Telecom and Telemar to adhere to the terms of the National Broadband Plan (
Programa Nacional de Banda Larga
), created in May 2010 by Executive Decree No. 7,175/10 with the goal to make
broadband access available at low cost, regardless of technology, throughout Brazil. Pursuant to the Term of Commitment, Brasil Telecom and Telemar are required to offer (1) broadband services with minimum upload and download capabilities to
retail customers in certain sectors of Region I and II for a maximum price of R$35 per month (or R$29.90 in ICMS-exempt states), plus fees, and (2) access to the broadband infrastructure of Brasil Telecom and Telemar to certain wholesale
customers, including small businesses and municipalities, in certain sectors of Region I and II for a maximum price of R$1,253 per 2 Mbps per month and a one-time installation fee, while observing all quality standards under ANATEL regulations. Both
retail and wholesale services are subject to certain network capacity limits and need only be provided at the demand of the customer. The services provided under the Term of Commitment may be implemented gradually, beginning in November 2011,
although Brasil Telecom and Telemar are obligated to make services available to 100% of eligible retail and wholesale customers by December 31, 2014 and June 30, 2013, respectively. The Term of Commitment also requires that Brasil Telecom
and Telemar:
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provide one public internet access point for the first 20,000 inhabitants and one additional access point for each subsequent 10,000 inhabitants, with
a limit of six access points, at a speed of 2 Mbps, in each municipality that has only satellite service, free of charge and upon demand of such municipality;
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adequately advertise the services contemplated by the Term of Commitment and present to the Ministry of Communications semi-annual reports detailing
the marketing efforts of Brasil Telecom and Telemar; and
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make its best efforts to offer broadband services to retail customers at speeds of up to 5 Mbps, reaching the largest possible number of municipalities
by 2015.
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The Term of Commitment will expire on December 31, 2016.
Introduction of “
Oi Fixo ilimitado
” Plans
In February 2011, Brasil Telecom and Telemar introduced our “
Oi Fixo ilimitado
” plans in an effort to combat the
migration of our fixed-line users to mobile subscriptions of other mobile service providers. Under these plans, Brasil Telecom and Telemar offer unlimited local fixed-to-fixed calls and offer our subscribers the option of choosing an increased
number of local fixed-to-mobile minutes for calls to the mobile customers of Brasil Telecom and Telemar and an increased number of fixed-to-fixed long distance minutes than are available under the other alternative plans of Brasil Telecom and
Telemar at similar prices. In September 2011, we intend to modify these plans and will no longer offer an increased number of local fixed-to-mobile minutes.
Financial Transactions
Incurrence of Long-Term Debt
Export Credit Facility Agreement with Cisco Systems Capital
In March 2011, Telemar entered into an export credit facility agreement with Cisco Systems Capital, or Cisco, under which Cisco agreed to
disburse loans in the aggregate principal amount of up to US$100 million. A disbursement of US$46 million under this export credit facility was received in May 2011. The proceeds of this export credit facility have been and will be used to fund
equipment purchases related to our capital expenditures on our fixed-line and mobile telecommunications infrastructure. Loans under this export credit facility bear
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PART FOUR—RECENT DEVELOPMENTS
interest at the rate of 3.5% per annum. Interest on each of these loans is payable semi-annually in arrears through maturity in May 2018. The outstanding principal amount of these loans is
payable in 13 semi-annual installments commencing in May 2012.
Issuance of Non-Convertible Debentures by TNL
In May 2011, TNL issued non-convertible debentures in an offering made in Brazil. The aggregate principal amount of the debentures was
R$1,500 million. These debentures mature in May 2012 and bear interest at a rate of the CDI rate plus 0.65% per annum. We used the net proceeds of this offering for general corporate purposes and to repay promissory notes that had been issued
in February 2011 to refinance its debenture due February 2011.
Disbursements under Credit Facility with FINNVERA
In August 2009, Telemar entered into an export credit facility agreement with Finnish Export Credit Ltd., or FINNVERA, under which
FINNVERA agreed to disburse loans in the aggregate principal amount of up to US$500 million. FINNVERA made additional disbursements of US$74 and US$97 million under this export credit facility in February 2011 and June 2011, respectively.
Disbursement under Credit Facility with China Development Bank
In October 2009, Telemar entered into a credit facility agreement with China Development Bank under which China Development Bank agreed to
disburse loans in the aggregate principal amount of up to US$500 million. In January 2011, China Development Bank made an additional disbursement of US$98 million under this export credit facility.
Disbursement under Credit Facility with Crédit Agricole Corporate and Investment Bank
In April 2010, Telemar entered into an export credit facility agreement with Crédit Agricole Corporate and Investment Bank, or
Credit Agricole, as lender and facility agent, under which Crédit Agricole agreed to disburse loans in the aggregate principal amount of up to US$220 million, in two tranches of US$110 million each. Crédit Agricole made an additional
disbursement under the first tranche of this export credit facility of US$31 million in February 2011, and made a disbursement under the second tranche of this export credit facility of US$55 million in May 2011.
Stand-by Credit Facility with China Development Bank
In June 2011, Telemar entered into a stand-by credit facility with China Development Bank under which China Development Bank agreed to disburse loans in the aggregate principal amount of up to US$500
million. A disbursement of US$380 million under this stand-by credit facility was received in July 2011. The proceeds of this stand-by credit facility have been and will be used to refinance other indebtedness of Telemar. Loans under this stand-by
credit facility bear interest at the rate of LIBOR plus 2.30% per annum, payable semi-annually in arrears through maturity in June 2016. The principal of these loans is payable in five semi-annual installments, commencing in October 2014.
Line of Credit with Swedish Export Corporation
In June 2011, Telemar entered into an export credit facility with Swedish Export Corporation, or SEK, and Deutsche Bank under which SEK agreed to disburse loans in the aggregate principal amount of up to
US$103 million. A disbursement of US$5 million under this export credit facility was received in July 2011. The
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PART FOUR—RECENT DEVELOPMENTS
proceeds of this export credit facility have been and will be used to fund equipment purchases related to our capital expenditures on our fixed-line and mobile telecommunications infrastructure.
Loans under this export credit facility bear interest at the rate of 2.21% per annum, payable semi-annually in arrears, commencing in January 2012. The principal of these loans is payable in 17 equal semi-annual installments, commencing in
February 2012.
Issuance of Non-Convertible Debentures by Brasil Telecom
In August 2011, Brasil Telecom issued non-convertible debentures in an offering made in Brazil. The aggregate principal amount of the
debentures was R$1,000 million. These debentures mature in August 2017 and bear interest at the CDI rate plus 1.00% per annum. We used the net proceeds of this offering for working capital and amortization of indebtedness.
Disbursement under BNDES Credit Facility
In December 2009, Telemar entered into a credit facility with BNDES under which BNDES agreed to disburse loans to Telemar in two tranches in an aggregate principal amount of up to R$2,371 million. In July
2011, BNDES made an additional disbursement of R$600 million to Telemar under this credit facility. This loan bears interest at the TJLP rate plus 3.95% per annum, payable quarterly in arrears through December 2011 and monthly in arrears thereafter.
The outstanding principal amount of this loan is payable in 84 equal monthly installments commencing in January 2012.
Prepayment of
Long-Term Debt
In April 2011, Telemar prepaid R$2,000 million aggregate principal amount borrowed from a Brazilian
financial institution under an unsecured line of credit in November 2009.
On August 22, 2011, Telemar prepaid all
outstanding amounts, an aggregate of R$673 million, under its syndicated credit facility with Citibank Japan Ltd., Sumitomo Mitsui Banking Corporation and the other lenders party thereto, which The Japan Bank of International Cooperation had
guaranteed.
Maintenance Contracts
Telemar and Brasil Telecom have entered into a services agreement with Telemont Engenharia de Telecomunicações S.A. for installation, operation, and corrective and preventive maintenance in
connection with their external plant and associated equipment, public telephones, and fiber optic and data communication networks (including broadband access services) in the States of Minas Gerais, Espirito Santo, a portion of Rio de Janeiro, the
Federal District, Mato Grosso, Mato Grosso do Sul, Tocantins, Acre, Rondônia and Goias. The total estimated payments under this contract are expected to be R$2.8 billion, of which Brasil Telecom’s portion is expected to be R$1.1 billion,
during the five-year term of this contract, which expires in March 2015.
Legal Matters
In August 2011, as a condition to ANATEL’s agreement to evaluate the corporate reorganization, ANATEL required that TNL pay all
pending administrative fines, amounting to approximately R$113 million. TNL has deemed the risk of loss as possible and has not recorded any provisions in respect of these claims. TNL sought and has been granted injunctive relief, which has
permitted them to make judicial deposits of these amounts while preserving their rights to contest these fines. As of the date of this prospectus, ANATEL has not appealed these injunctions.
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PART FOUR—RECENT DEVELOPMENTS
Regulatory Developments in 2011
Adoption of Amendments to General Plan on Universal Service
On June 30, 2011, the General Plan on Universal Service was amended. Among other things, these amendments:
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expanded the obligations of local fixed-line service providers to provide individual access to fixed-line voice services to economically disadvantaged
segments of the Brazilian population within their service areas, through programs to be established and regulated by ANATEL;
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reduced the density requirements applicable to the obligations of local fixed-line service providers to provide public telephones in urban areas within
their service areas; and
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expanded the obligations to provide universal service in rural and remote areas of local and long-distance fixed-line providers that obtain
authorizations to use radio spectrum in the 450 Mhz band, including increased obligations to provide individual and group access to fixed-line voice services.
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Elimination of Limitation on Number of Subscription Television Services Authorizations
In December 2010, ANATEL adopted new regulations eliminating the limitation on the number of authorizations to provide subscription television services. We expect that subsidiaries of Brasil Telecom will
apply for authorizations to provide subscription television services through the networks of Telemar and Brasil Telecom in Regions I and II in the first quarter of 2012.
Passage of PLC 116
In August 2011, the
Brazilian Senate passed House Bill No. 116 (
Projeto de Lei da Câmara 116
), or PLC 116, which creates a new legal framework for subscription television services in Brazil, ending the current regulatory asymmetries between cable
television, Multichannel Multipoint Distribution Service, or MMDS, and DTH technologies. The principal provisions of PLC 116: (1) allow telephone companies, who previously were allowed to provide subscription television services using only MMDS
and DTH technologies, to enter the cable television market in Brazil; (2) remove existing restrictions on foreign capital investments in cable television providers; and (3) establish minimum quotas for domestic content programming on every
television channel. This framework is expected to increase the availability and lower the price of subscription television services in Brazil, through increased competition among providers, and improve the quality, speed and availability of
broadband internet services as a result of the expected proliferation of fiber optic cables used to transmit cable television. The President of Brazil is expected to sign PLC 116 into law in September 2011, after which ANATEL must implement this law
through regulatory measures. We expect that subsidiaries of Brasil Telecom will apply for authorizations to provide cable television services through the networks of Telemar and Brasil Telecom in Regions I and II in the first half of 2012.
Proposed General Plan on Competition Targets
ANATEL has proposed a General Plan on Competition Targets (
Plano Geral de Metas de Competição
), which contemplates
the creation of three entities to manage information about telecommunications networks, act as an intermediary in contracts between telecommunications providers and supervise the offering of wholesale and retail data traffic services. The proposed
General Plan on Competition Targets also addresses a variety of other matters, including criteria for the evaluation of telecommunications providers to determine which providers have significant market power, regulations applicable to the wholesale
markets for trunk lines, backhaul, access to internet backbone and interconnection services, and regulations related to partial unbundling and/or full unbundling of the local fixed-line networks of the public regime service providers. The General
Plan on
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PART FOUR—RECENT DEVELOPMENTS
Competition Targets was submitted for public consultation in July 2011 and the public consultation period is scheduled to end on September 8, 2011. We expect these new regulations, as they
may be modified as a result of ANATEL’s further analysis, to be adopted during the first half of 2012.
Proposed Mobile Interconnection Regulations
ANATEL has proposed new regulations under which the VC-1, VC-2 and VC-3 rates would be reduced from current levels, after giving effect to an inflation adjustment based on the IST, by 10% in 2012 and 10%
in 2013. These proposed regulations also provide procedures for determining the reference value for VU-M rates in the event that providers cannot agree upon the VU-M applicable in their interconnection agreements. These regulations were submitted
for public consultation in October 2010 and the public consultation period ended on November 12, 2010. ANATEL continues to analyze these proposed regulations. We expect these new regulations, as they may be modified as a result of ANATEL’s
further analysis, to be adopted by the end of 2011.
Proposed Modification of Factor X
ANATEL has proposed new regulations under which it would modify the Factor X applicable to the determination of rate increases available
to public concessionaires providing fixed-line services. These regulations were submitted for public consultation in July 2011 and the public consultation period is scheduled to end on September 1, 2011. We expect these new regulations, as they
may be modified as a result of ANATEL’s further analysis, to be adopted in the fourth quarter of 2011.
Authorizations to Use 450MHz Band and 2.5 GHz Band
Under Executive Decree 7,512, dated June 30, 2011, or Executive Decree 7,512, ANATEL is required to grant authorizations to
telecommunications providers to use radio spectrum in the 450 Mhz band radio spectrum and the 2.5 GHz radio spectrum by April 30, 2012. Among other obligations, licensees of radio frequencies in the 450 Mhz band radio spectrum must agree to
provide individual and collective voice and data services in rural and remote areas, in accordance with the provisions of Executive Decree 7,512 and the General Plan on Universal Service. ANATEL has not yet announced the terms of the auctions for
radio frequency spectrum in the 450 Mhz band and 2.5 GHz band. We intend to evaluate our participation in these auctions following the announcement of the terms of these auctions.
Public Consultations Regarding WiMax Spectrum Auctions
ANATEL has concluded public consultations regarding auctions of radio frequency licenses that will be used to establish WiMax networks. DTH providers have voiced concerns that WiMax services would
interfere with transmission of television signals on the C Band, which is in widespread use for DTH transmissions in Brazil. As a result, ANATEL is conducting technical studies to determine the scope of this interference and the feasibility of
offering WiMax services. If ANATEL decides to conduct auctions of this radio frequency spectrum, we expect that such auctions will occur in 2012.
Proposed Quality Standards for Broadband Internet Services
In June 2011, Executive Decree No. 7,512/11 mandated ANATEL to take the necessary regulatory measures to establish quality standards for broadband internet services, including parameters for minimum
and average connection speeds, availability of services, advertising rules and transparency. According to Executive Decree No. 7,512/11, ANATEL must adopt such measures by October 31, 2011. These regulations were submitted for public
consultation in August 2011 and the public consultation period is scheduled to end on September 8, 2011.
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PART
FIVE—THE MERGER
The following is a description of the material aspects of the merger. While Brasil Telecom believes that the following description covers the material terms of the merger, the description may not
contain all the information that is important to you. Brasil Telecom encourages you to carefully read this entire prospectus and the Merger Agreement for a complete understanding of the merger.
Reasons for t
he Merger
The merger is a step in the corporate reorganization that TNL, Telemar, Coari and Brasil Telecom are undertaking to simplify the corporate structure of these companies. The corporate reorganization is
expected to be accomplished through the following three transactions that will occur contemporaneously and will cumulatively result in the conversion of the publicly held shares of TNL and Telemar into shares of Brasil Telecom:
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a split-off and share exchange under Brazilian law in which (1) Telemar will transfer the shares of Coari that Telemar owns to Coari,
(2) Coari will assume a portion of the liabilities of Telemar, which will become joint and several liabilities of Telemar and Coari, (3) the Telemar common and preferred shares (other than the shares of holders who exercise their
withdrawal rights with respect to such shares) will be exchanged automatically for newly issued common and preferred shares of Coari without any further action by the holders thereof, and (4) Coari will retain the Telemar shares exchanged for
Coari shares and as a result, Telemar will become a wholly-owned subsidiary of Coari;
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a merger under Brazilian law of Coari with and into Brasil Telecom, with Brasil Telecom as the surviving company; and
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The split-off and share exchange, the Coari merger and the merger are expected to be completed contemporaneously and each transaction is
conditioned upon the approval and completion of the other transactions.
Neither Coari nor Brasil Telecom is offering the shares to be issued in the split-off and share exchange or the Coari merger, as applicable, by means of this prospectus.
We believe that the corporate reorganization will:
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simplify the corporate structure of the Oi Companies, which is currently extremely complex and includes three publicly-held companies with seven
different classes of publicly-traded shares, and simplify the corporate governance of the Oi Companies by consolidating the shareholder bases of the Oi Companies in one public company with two classes of shares that will be traded in Brazil and
abroad;
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reduce operational, administrative and financial costs following the consolidation of the general management of the Oi Companies, the simplification of
their capital structure, and the improvement of their ability to attract investments and access the capital markets;
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align the interests of the shareholders of the Oi Companies;
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enhance the liquidity of the shares of Brasil Telecom; and
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eliminate the costs of separate listings of the shares of TNL, Telemar and Brasil Telecom, as well as those costs arising from separately complying
with the public disclosure requirements applicable to TNL, Telemar and Brasil Telecom.
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PART FIVE—THE MERGER
The foregoing discussion of factors is not considered by our
board of directors to be exhaustive, but instead, includes the material factors or reasons causing us to approve the merger. In reaching their conclusion, our board of directors did not quantify or assign any relative weight to the factors
considered and individual directors may have given different weight to different factors. Our board of directors considered all of the factors as a whole and overall considered them to be favorable to, and to support their conclusions with respect
to, the merger.
Background of th
e Merger
The merger is a step in the corporate reorganization that TNL, Telemar and Brasil Telecom are undertaking to simplify the corporate
structure of these companies.
Corporate Reorg
anization
For the past several years, TmarPart and its shareholders have considered a variety of methods to simplify the corporate structure of TNL
and its publicly-traded subsidiaries. At various times, the shareholders of TmarPart have met with their legal and financial advisors to discuss proposals to reorganize the corporate structure of TNL and its subsidiaries, including (1) a
corporate restructuring, including a merger of shares (
incorporação de ações
) under Brazilian law between TmarPart and TNL, which was proposed in 2006, (2) the tender offer conducted by TmarPart for the
outstanding shares of TNL conducted in 2007, and (3) the merger of Brasil Telecom into Coari and the merger of Coari into Telemar which was proposed in 2009.
Following the capital increases of TNL and Telemar in March 2011, TmarPart began internal discussions regarding the current proposal to simplify the corporate structure of TNL, Telemar, Coari and Brasil
Telecom. TmarPart first held internal discussions regarding the proposed corporate reorganization on April 5, 2011. TmarPart engaged financial advisors and legal advisors during April 2011 to assist them in evaluating potential alternative
corporate structures. These internal discussions continued during April and May 2011, becoming more frequent during May 2011. During April and May 2011, TNL and its subsidiaries provided information regarding the operations and financial condition
of TNL and its subsidiaries to TmarPart to assist in evaluating the proposed corporate reorganization.
As a result of these
discussions, TmarPart publicly announced the proposed corporate reorganization on May 24, 2011. The corporate reorganization consists of several transactions described below, including the merger, each of which will occur consecutively on the
same date following the approval of all of the transactions. The completion of each of these transactions is conditioned on the approval of all of these transactions.
Share Dividend and Redemption
In connection with the corporate
reorganization, we will submit for approval at our extraordinary shareholders’ meeting called to approve the Coari merger and the merger a proposal to:
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issue and distribute prior to the Coari merger and the merger:
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one Class B redeemable preferred shares to the holder of each Brasil Telecom common share; and
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one Class C redeemable preferred shares to the holder of each of Brasil Telecom preferred share; and
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redeem each Class B redeemable preferred share and Class C redeemable preferred share at a redemption price equal to R$2.543282 per share.
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The issuance, distribution and redemption of the redeemable shares will be submitted for the approval of
the holders of common shares of Brasil Telecom at an extraordinary general shareholders’ meeting scheduled to
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PART FIVE—THE MERGER
occur on , 2011. Approval of the issuance, distribution and redemption of
the redeemable shares will require the affirmative vote of holders representing a majority of the total number of outstanding common shares of Brasil Telecom present at a duly convened extraordinary general shareholders’ meeting.
We believe that the issuance, distribution and redemption of the redeemable shares and the related capital increase of Brasil Telecom
will be approved at the Brasil Telecom extraordinary general shareholders’ meeting because, at the time of the extraordinary general shareholders’ meetings called to consider the corporate reorganization, TmarPart will directly and
indirectly hold 68.3% of the outstanding voting share capital of TNL, TNL holds 98.0% of the outstanding voting share capital of Telemar, Telemar holds all of the outstanding voting share capital of Coari, Coari holds 79.6% of our outstanding voting
share capital, and TmarPart has represented to us that it will cause Coari to vote the shares of Brasil Telecom that it holds in favor of the issuance, distribution and redemption of the redeemable shares and the related capital increase of Brasil
Telecom.
The Split-Off and Share Exchange
The split-off and share exchange will be the first step in the proposed corporate reorganization. The boards of directors of each of Coari and Telemar have approved a split-off under Brazilian law
(
cisão
) and the share exchange in which:
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Telemar will transfer the shares of Coari that it owns to Coari;
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Coari will assume certain liabilities of Telemar under debt obligations of Telemar with an aggregate principal amount of R$16,086 million as of
June 30, 2011, including Telemar’s obligations under its outstanding 5.125% Senior Notes due 2017, 9.500% Senior Notes due 2019 and 5.500% Senior Notes due 2020, all of which will become joint and several liabilities of Telemar and Coari;
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in exchange for the issued and then outstanding shares of Telemar that are cancelled, Coari will issue without any further action by the holders
thereof:
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to the holder of each Telemar common share (excluding any common shares held by shareholders who have exercised their withdrawal rights in connection
with such common shares), one common share of Coari;
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to the holder of each Telemar class A preferred share (excluding any class A preferred shares held by shareholders who have exercised their withdrawal
rights in connection with such class A preferred shares), one preferred share of Coari; and
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to the holder of each Telemar class B preferred share (excluding any class B preferred shares held by shareholders who have exercised their withdrawal
rights in connection with such class B preferred shares), one preferred share of Coari; and
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Telemar will become a wholly-owned subsidiary of Coari.
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An English translation of the Protocol and Justification of the split-off and share exchange is included as Exhibit 2.2 to the registration statement of which this prospectus is a part.
The split-off and share exchange will be submitted for the approval of the holders of common shares of Telemar and the common shares of
Coari at extraordinary general shareholders’ meetings of Telemar and Coari that are scheduled to occur on , 2011. At the
extraordinary general shareholders’ meeting of Coari called to consider the split-off and share exchange, the holders of common shares of Coari will also vote to amend the bylaws of Coari to increase its share capital to R$21,898,692,753.92
represented by 344,056,833 shares, consisting of 154,032,213 common shares and 190,024,620 preferred shares. Approval of the split-off and share exchange will require (1) the affirmative vote of holders representing a majority of the total
number of outstanding common shares of Telemar, and (2) the affirmative vote of holders representing a majority of the
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PART FIVE—THE MERGER
total number of outstanding common shares of Coari, at duly convened extraordinary general shareholders’ meetings. Approval of the increase in the share capital of Coari will also require
the affirmative vote of holders representing a majority of the total number of outstanding common shares of Coari present at a duly convened extraordinary general shareholder’s meeting.
We believe that the split-off and share exchange and the increase in the share capital of Coari will be approved at the applicable
extraordinary general shareholders’ meetings because TmarPart (which, at the time of the extraordinary general shareholders’ meetings called to consider the corporate reorganization, will directly and indirectly hold 68.3% of the
outstanding voting share capital of TNL, which holds 98.0% of the outstanding voting share capital of Telemar, which, in turn, holds all of the outstanding voting share capital of Coari) has represented to us that it (1) will cause TNL to vote
the shares of Telemar that it holds in favor of the split-off and share exchange, and (2) will cause Telemar to vote the shares of Coari that it holds in favor of the split-off and share exchange and the increase in the share capital of Coari.
If approved by the shareholders of Telemar and Coari, the split-off and share exchange is expected to be completed
simultaneously with the Coari merger and the merger. Approval of the split-off and share exchange by the shareholders of Telemar and Coari is a condition to the completion of the Coari merger and the merger, and approval of the Coari merger and the
merger by the shareholders of TNL, Coari and Brasil Telecom entitled to vote with respect to these transactions is a condition to the completion of the split-off and share exchange.
Holders of Telemar common shares, class A preferred shares and class B preferred shares as of the close of trading on May 24, 2011,
the date of the Relevant Fact that first announced the split-off and share exchange, will have withdrawal rights in connection with the split-off and share exchange. Shareholders who exercise such withdrawal rights will be entitled to receive
R$ per share based on an independent economic appraisal report that under Telemar’s bylaws it was required to have
prepared by an independent valuation firm. See “Part 3—Risk Factors—Risks Related to the Merger—The exercise of withdrawal rights by Telemar shareholders in connection with the split-off and share exchange may negatively affect
the financial condition of Brasil Telecom.”
TNL and Coari will account for the split-off and the share exchange based on
the carry-over basis of the assets and liabilities of Telemar and the debt that will be transferred from Telemar to Coari. As a result of this transaction, Telemar will become a wholly-owned subsidiary of Coari. This phase of the corporate
restructuring will have no impact on the financial statements of Brasil Telecom.
The Coari Merger
The Coari merger will be the second step in the proposed corporate reorganization. The board of directors of each of Brasil Telecom and
Coari have approved the Coari merger, in which:
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Coari will merge with and into Brasil Telecom, with Brasil Telecom as the surviving company;
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all issued and then outstanding shares of Brasil Telecom held by Coari and all Coari shares held in treasury will be cancelled;
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each issued and then outstanding common share of Coari (other than any common shares held by shareholders who exercise their withdrawal rights in
connection with such common shares) will be converted automatically into 5.1149 common shares of Brasil Telecom, plus cash in lieu of any fractional shares, without any further action by the holders thereof;
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each issued and then outstanding preferred share of Coari (other than any preferred shares held by shareholders who exercise their withdrawal rights in
connection with such preferred shares) will be converted automatically into 0.3904 common shares of Brasil Telecom and 4.0034 preferred shares of Brasil Telecom, plus cash in lieu of any fractional shares, without any further action by the holders
thereof;
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PART FIVE—THE MERGER
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Coari will cease to exist; and
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Telemar will become a wholly-owned subsidiary of Brasil Telecom.
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An English translation of the Protocol of Merger and Instrument of Justification related to the Coari merger is included as Exhibit 2.3 to the registration statement of which this prospectus is a part.
The Coari merger will be submitted for the approval of the holders of common shares of Brasil Telecom and the common shares
of Coari at extraordinary general shareholders’ meetings of Brasil Telecom and Coari that are scheduled to occur on , 2011.
At the extraordinary general shareholders’ meeting of Brasil Telecom called to consider the Coari merger, which will also consider the merger, the holders of common shares of Brasil Telecom will also vote to amend the bylaws of Brasil Telecom
to increase its share capital to R$6,816,467,847.01 represented by 1,797,069,689 shares, consisting of 598,999,380 common shares and 1,198,070,309 preferred shares. Approval of the share exchange will require (1) the affirmative vote of holders
representing a majority of the total number of outstanding common shares of Brasil Telecom, and (2) the affirmative vote of holders representing a majority of the total number of outstanding common shares of Coari, at duly convened
extraordinary general shareholders’ meetings. Approval of the increase in the share capital of Brasil Telecom will also require the affirmative vote of holders representing a majority of the total number of outstanding common shares of Brasil
Telecom present at a duly convened extraordinary general shareholder’s meeting.
We believe that the Coari merger and the
increase in the share capital of Brasil Telecom will be approved at the applicable extraordinary general shareholders’ meetings because TmarPart (which at the time of the extraordinary general shareholders’ meetings called to consider the
corporate reorganization, will directly and indirectly hold 68.3% of the outstanding voting share capital of TNL, which holds 98.0% of the outstanding voting share capital of Telemar, which holds all of the outstanding voting share capital of Coari,
which holds 79.6% of our outstanding voting share capital) has represented to us that it (1) will cause Telemar to vote the shares of Coari that it holds in favor of the Coari merger, and (2) will cause Coari to vote the shares of Brasil
Telecom that it holds in favor of the Coari merger and the increase in the share capital of Brasil Telecom.
If approved by
the shareholders of Brasil Telecom and Coari, the Coari merger is expected to be completed simultaneously with the split-off and share exchange and the merger. Approval of the Coari merger by the shareholders of Brasil Telecom and Coari is a
condition to the completion of the split-off and share exchange and the merger, and approval of the split-off and share exchange and the merger by the shareholders of TNL, Telemar, Coari and Brasil Telecom entitled to vote with respect to these
transactions is a condition to the completion of the Coari merger.
Although holders of Coari common shares and preferred
shares as of the close of trading on May 24, 2011, the date of the Relevant Fact that first announced the Coari merger, will have withdrawal rights in connection with the Coari merger, because on that date Coari was a wholly owned subsidiary of
Telemar and Telemar has advised us that it will not exercise the withdrawal rights that it will have as a shareholder of Coari, we do not expect that any withdrawal rights relating to the Coari merger will be exercised.
In the current corporate structure, Coari is a holding company that controls Brasil Telecom. The Coari merger will be a business
combination of companies under common control. IFRS 3(R) does not apply to combinations of entities under common control. Furthermore, this transaction is not addressed under other IFRS guidance. Since these entities are under common control, Brasil
Telecom will account for the Coari merger using the carry-over basis of the assets received and liabilities assumed of Telemar and Coari, without any step-up in the basis of its own assets and liabilities. Consequently, effects of the purchase
accounting recorded by Coari
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PART FIVE—THE MERGER
relating to Coari’s acquisition of Brasil Telecom will not be “pushed down” to the assets and liabilities of Brasil Telecom in its consolidated financial statements as a result of
this merger. Upon completion of this merger, Telemar will become a wholly-owned subsidiary of Brasil Telecom and Coari will cease to exist.
Approval of
the Merger
Brasil Telecom and TNL are Brazilian companies and thus Brazilian law and the rules of the CVM govern (1) the shareholder approvals required to authorize the merger, (2) which shareholders are
entitled to vote with respect to the merger, and (3) how shareholder voting takes place. Brazilian law and the rules of the CVM also govern the duties and obligations of Brasil Telecom and TNL and their respective boards of directors in
connection with the merger. Under Brazilian law, an extraordinary general shareholders’ meeting of Brasil Telecom and TNL, respectively, must be held to consider and vote upon transactions such as the merger.
Brazilian law generally imposes on a board of directors a fiduciary duty to assure that contracts with related parties be on arm’s
length terms. Nevertheless, in connection with the merger, Brazilian law does not (1) establish any specific, minimum or maximum exchange ratio, (2) require that the board of directors of Brasil Telecom or TNL formally determine that the
terms of the merger as a whole are “fair,” either procedurally or financially, to its non-controlling shareholders, (3) establish any special committee or otherwise alter its corporate governance rules in connection with the merger,
or (4) impose any prohibition or limitation on the voting rights of the controlling shareholder. However, Guideline 35 recommends that where a controlling company and its subsidiaries or affiliated companies are involved in a merger, a special
committee be established to protect the interests of the non-controlling shareholders and negotiate the terms and conditions for such corporate transaction. Brasil Telecom and TNL have voluntarily elected to follow the recommendations set forth in
Guideline 35.
Guideline 35 contains several recommended methods with respect to the selection of the members of an
independent special committee by a board of directors. These methods are (1) selecting only members of the board of directors, so long as a majority of these members are independent members pursuant to the regulations of the Novo Mercado of the
BM&FBOVESPA, (2) selecting members that are not part of the board of directors, so long as they would all be considered independent pursuant to the regulations of the Novo Mercado of the BM&FBOVESPA, or (3) selecting two members of
the board of directors to serve as members of the special committee, one of these directors having been elected to the board of directors by the minority shareholders, and having a third member of the special committee selected by the first two
members of the special committee.
The Special Committees
On June 28, 2011, TNL’s bylaws were amended by an extraordinary general shareholders meeting of TNL to provide for the creation
of an independent special committee, to be composed of three members, each independent and not managers of TNL, with established experience and expertise, to assess the terms of the proposed merger.
On June 28, 2011, Brasil Telecom’s bylaws were amended by an extraordinary general shareholders meeting of Brasil Telecom to
provide for the creation of an independent special committee, to be composed of three members, each independent and not managers of Brasil Telecom, with established experience and expertise, to assess the terms of the proposed merger and the
proposed Coari merger.
On June 29, 2011 each of Brasil Telecom and TNL established an independent special committee in
accordance with their respective bylaws, as recommended in Guideline 35. Each independent special committee consists of three members elected by the applicable board of directors and subject to the same legal duties and responsibilities ascribed to
our managers under the Brazilian Corporation Law. None of the members of the
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PART FIVE—THE MERGER
independent special committees is a director, officer or employee of Brasil Telecom or TNL, and each member of the independent special committees was determined to be independent as defined by
the Listing Regulations of the Novo Mercado of the BM&FBOVESPA, which require that he must:
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have no ties to Brasil Telecom or TNL except for owning an equity share of its capital stock;
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not be a controlling shareholder of Brasil Telecom or TNL, the controlling shareholder’s spouse or a relative to the second degree, and not be
affiliated with or have had an affiliation in the last three years to Brasil Telecom or TNL or any entity with ties to the controlling shareholder;
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not be a senior manager of Brasil Telecom or TNL or employed by or work for Brasil Telecom or TNL, the controlling shareholder of Brasil Telecom or
TNL, or any other company controlled by Brasil Telecom or TNL;
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not be a direct or indirect supplier or purchaser of services or products of Brasil Telecom or TNL to a degree that results in loss of independence;
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not be an employee or manager of a company or entity that supplies services or products to, or buys these from, Brasil Telecom or TNL; and
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not be a spouse or a relative to the second degree of any senior manager of Brasil Telecom or TNL.
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Independent Special Committee of Brasil Telecom
The members of our independent special committee are Alvaro Bandeira, Iran Siqueira Lima and José Claudio Rego Aranha. Summarized below is information regarding the business experience, areas of
expertise and principal business interests of the members of our independent special committee.
Mr. Álvaro
Bandeira
is currently the director responsible for retail at Ativa Corretora. He has served on the audit committee of Souza Cruz, was a member of the board of directors of BVRJ for 12 years, vice-president of the Syndicate of Brokers
(
Sindicato dos Corretores
) for two terms, vice-president and president of Bolsa Brasileira de Futuros – BBF (RJ), for two terms, president, vice-president and executive officer of Abamec Rio for two terms, president of Abamec Nacional,
vice-president of Apimec Nacional, president of Apimec Rio and president of Apimec Nacional. He has also served as officer of macroeconomic studies at Ágora CTVM S.A. and Bradesco Corretora, officer at Senso Corretora de Valores, director of
operations and vice-president of Banco Interunion S.A., director of securities at Stock S.A. and assistant director at Corretora Arbi S.A. In addition, Mr. Bandeira has been a member of the Capital Markets Disclosure Committee (
Comitê
de Divulgação do Mercado de Capitais
), member of the Capital Markets Consultative Committee (
Comissão Consultiva do Mercado de Capitais
) and member of the MERCOSUL Commission of the BM&FBOVESPA. In 1996, he
received the Analyst Securities Award (Prêmio Analista de Valores Mobiliários). Mr. Bandeira started his career in 1971 at Banco Brascan de Investimentos and has since worked in several companies, including Banco de Investimentos
Lar Brasileiro – CHASE, Banco Bamerindus de Investimentos and Lopes Filho e Associados – Consultores de Investimentos. Mr. Bandeira graduated from the Federal University of Rio de Janeiro (
Universidade Federal do Rio de
Janeiro
) with a degree in economics and received a post-graduate degree in economic engineering and industrial administration from Instituto Alberto Luiz Coimbra de Pós-Graduação e Pesquisa de Engenharia – COPPE.
Mr. Iran Siqueira Lima
is currently retired from the Brazilian Central Bank. He worked as professor of the
Actuary and Accounting Department of FEA/USP, chief financial officer of FIPECAFI – Fundação Instituto de Pesquisas Contábeis, Atuariais e Financeiras; chairman of the board of directors of IPECAFI – Instituto
Brasileiro de Pesquisas Contábeis, Atuariais e Financeiras; chairman of the audit committee of Itaú Unibanco S.A. and member of the audit committee of IBRI—Instituto Brasileiro de Relações com Investidores; managing
partner of L&M – Consultores Associados S/C Ltda; member of the arbitration committee of the BM&FBOVESPA and of Fundação Getúlio Vargas; member of the listing committee (Bovespa-Mais) of the BM&FBOVESPA; member
of the board of directors of ANEFAC – Associação Nacional dos Executivos de
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PART FIVE—THE MERGER
Finanças, Administração e Contabilidade; board member of IBMEC – Instituto Brasileiro de Mercado de Capitais; and business consultant in the financial area. He was
chairman of the board of trustees of FIPECAFI – Fundação Instituto de Pesquisas Contábeis, Atuariais e Financeiras as well as of Fundação Instituto Capixaba de Pesquisas em Contabilidade, Economia e
Finanças – FUCAPE. Mr. Lima served as executive officer of the capital markets area of Banco Cidade S.A/Banque Nationale de Paris-PNP. He was a member of the board of trustees of Fundação CENTRUS –
Fundação Banco Central de Previdência Privada and member of the board of directors of Ache Laboratórios Farmacêuticos S/A, the Brazilian National Bank for Economic and Social Development (Banco Nacional de
Desenvolvimento Econômico e Social), UNIPAR – União de Indústrias Petroquímicas S.A., Petroquímica União S/A—PQU, Telecomunicações Brasileiras TELEBRÁS,
Telecomunicações de São Paulo S/A-TELESP. In addition, he has also been a member of the audit committees of Carbocloro S/A, Renault do Brasil S/A., Duratex S/A, and FUSP – Fundação de Apoio à
Universidade de São Paulo. He was chief financial officer of Banco Crediplan S/A, IPECAFI – Instituto Brasileiro de Pesquisas Contábeis, Atuariáis e Financeiras and of Teleinvest Participações S/A and
executive officer of the capital markets and supervision areas of the Brazilian Central Bank. He was an executive secretary of SETS – Secretaria de Controle e Orçamento das Empresas Estatais, CISE – Conselho Interministerial de
Salários das Empresas Estatais and executive officer of economic, financial and investor relations at TELEBRÁS. Mr. Lima graduated
from the State University of Rio de Janeiro (
Universidade do Estado do Rio de Janeiro – UERJ
) with a degree in economics and from UDF with a degree in accounting. He holds a masters and
doctorate degree in accounting and controlling from the University of São Paulo (
Universidade de São Paulo–USP
) and post graduate degrees in economic engineering and industrial administration from UFRJ and in capital
markets from the Universidade Cândido Mendes and Fundação Getúlio Vargas. He has specialized in the financial markets and completed several courses in the United States and Japan.
Mr. José Claudio Rego Aranha
has 30 years experience in the financial industry and has worked at the Brazilian
National Bank for Economic and Social Development, as advisor to the financial and infrastructure officer and also as superintendent of the fixed income area, at Banco Nossa Caixa, as executive officer in the capital markets area, at BNDESPAR as an
investment analyst, manager and chief officer. He has worked as a project analyst at Petroquisa, planning engineer at Promom Engenharia, project analyst at Natron Engenharia, service department engineer at Caterpilla Brasil and project analyst at
Tecnometal. Mr. Aranha graduated from the engineering school of Universidade Federal Fluminense with a degree in mechanical industrial engineering. He holds an executive MBA in finances from COPEAD and a post-graduate degree in advanced
industrial management, Research Institute for Management Science (74, Delft-Holland). He also studied in courses for Brazilian development and evaluator improvement, both at the Brazilian National Bank for Economic and Social Development, and
management and planning at Indústria Petroquímica and Instituto Brasileiro de Petróleo.
Independent Special Committee
of TNL
The members of the TNL independent special committee are Jorge Eduardo Badra Donato, Luiz Alberto Pereira de Mattos
and Luiz Carlos Vieira da Silva. Summarized below is information regarding the business experience, areas of expertise and principal business interests of the members of TNL’s independent special committee.
Mr. Jorge Eduardo Badra Donato
is currently a business consultant at Planfil Consultoria Empresarial SC Ltda., providing
business and project intermediation and evaluation services, as well as structuring and negotiating financial transactions for specific projects. He has also served as commercial director, planning and control director, financial director and
financial planning manager at Aço Minas Gerais S.A., between July 1976 and October 1993. Mr. Donato graduated from the Federal University of Minas Gerais (
Universidade Federal de Minas Gerais
) with a degree in economic and
business administration sciences. He majored in business administration, with a focus in the areas of marketing, finance and departmental organization at Columbia University, in partnership with the João Pinheiro Foundation
(
Fundação João Pinheiro
).
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PART FIVE—THE MERGER
Mr. Luiz Alberto Pereira de Mattos
is professor
of financial administration at the Federal University of Rio de Janeiro (
Universidade Federal do Rio de Janeiro
) and a securities analyst registered with the CVM. He was a member of the audit committee of Sadia S.A. and an alternate member of
the audit committee of Banco do Brasil S.A., manager of business relations of CVM and partner of LLM Consultoria Financeira. In addition, he was also a partner at Lopes Filho & Associados, Consultores de Investimentos, where he was
responsible for advising several publicly held companies in the paper and pulp, steel, energy, agricultural and other industries regarding the capital markets. Mr. Pereira de Mattos holds a degree in economics, a post-graduate degree in
administration and production engineering and a masters degree in accounting.
Mr. Luiz Carlos Vieira da Silva
founded LC Vieira da Silva Economista Associados Ltda in 1990 and since then has managed this company, which provides consulting services for various corporations and institutions in Brazil and abroad, including Fundação Getúlio
Vargas and Vale S.A. He has served as superintendent of the Development Bank of Minas Gerais (
Banco de Desenvolvimento de Minas Gerais
); financial and administrative director of the Brazilian National Bank for Economic and Social Development
(
Banco Nacional de Desenvolvimento Econômico e Social
) – FINAME of Minas Gerais; director of international business at SISAL S/A; and officer at the State Bank of Minas Gerais (
Banco do Estado de Minas Gerais
). He has also
served as president and member on the boards of directors of various publically-listed companies, largely in the energy sector, including Vale S.A. He has participated in consultative and deliberative boards at institutions such as the Northeast
Development Superintendency (
Superintendência de Desenvolvimento do Nordeste
) and the Amazon Development Superintendency (
Superintendência de Desenvolvimento da Amazônia
). In addition, he has served as economic
adviser to Ministers and Secretaries of State. Mr. Vieira da Silva graduated from the Federal University of Minas Gerais (
Universidade Federal de Minas Gerais
) with a degree in economic sciences.
In connection with the merger:
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The independent special committee of Brasil Telecom met on July 4, 2011 to discuss (1) the service agreement establishing the scope and
purpose of the committee and the compensation to be paid to the members of the committee; (2) the operating rules of the committee and the conduct rules of its members; and (3) the benefits, details and timetable of the corporate
reorganization as well as the market reaction to the proposal of the corporate reorganization. The service agreement was executed at this meeting. Mr. Iran Siqueira Lima was elected as the coordinator of the committee. The committee determined
a target date for the conclusion of its analysis and the dates on which further meetings would be held. The committee requested that Brasil Telecom engage Itaú BBA as its financial advisor. Rosman, Penalva, Souza Leão, Franco Advogados
was selected to be the committee’s legal advisor.
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The independent special committee of TNL met on July 4, 2011 to discuss (1) the service agreement establishing the scope and purpose of the
committee and the compensation to be paid to the members of the committee; (2) the operating rules of the committee and the conduct rules of its members; and (3) the corporate reorganization, particularly with respect to the corporate
reorganization’s structure and timetable. The service agreement was executed at this meeting. Mr. Luiz Alberto Pereira de Mattos was elected as the coordinator of the committee. The committee requested that TNL engage BTG Pactual as its
financial advisor and Mr. Nelson Eizirik as its legal advisor.
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The independent special committee of TNL met on July 5, 2011. At this meeting, BTG Pactual gave a presentation with respect to its expertise and
experience. The members of the committee requested BTG Pactual, among other things, to prepare (1) a comparative study of different valuation methodologies, such as market values, book value and discounted cash flow, (2) an analysis of
which valuation methodologies would be the most appropriate for purposes of assessing the respective values of the shares of TNL and Brasil Telecom, and (3) a study of TNL’s intangible assets, income and expenses. The committee also
requested a proposed timetable for the completion of BTG Pactual’s work.
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PART FIVE—THE MERGER
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The independent special committee of Brasil Telecom met on July 8, 2011. At this meeting, Itaú BBA gave a presentation with respect to its
expertise and experience and requested financial information regarding the Oi Companies. The committee asked Itaú BBA to analyze the Oi Companies using not only market prices but also other traditional appraisal methodologies used to value
companies.
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The independent special committee of Brasil Telecom met on July 15, 2011. At this meeting, Itaú BBA delivered a preliminary draft of its
presentation of financial analyses with respect to the Oi Companies. During this meeting, the committee asked several questions and made several comments with respect to the preliminary draft of the presentation. Itaú BBA provided the
committee with answers to its questions. The committee agreed that (a) the exchange ratios would be calculated giving effect to the propose distribution and redemption of redeemable shares of Brasil Telecom; (b) the period between
March 29, 2011, the date of the capital increase of TNL and Telemar, and May 24, 2011, the date of the publication of the Relevant Fact that first announced the corporate reorganization, would be an appropriate period for the market price
valuation; and (c) Net should be excluded in an analysis of comparable companies due to the lack of liquidity in the market for its shares.
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The independent special committee of TNL met on July 18, 2011. At this meeting, Mr. Gaspar Carreira Júnior gave a presentation about
the legal issues involving the financial participation agreements entered into in connection to the expansion plans of Companhia Riograndense de Telecomunicações, or CRT. Mr. Bayard Gontijo gave a presentation about the evolution
of TNL and a general overview of the Brazilian telecommunications market, as well as a profile of the Oi Companies, including their business strategies and operational results. Mr. Tarso Rebello Dias presented the financial projections of the
Oi Companies as well as the business plans of Telemar and Brasil Telecom. The members of the committees asked various questions related to the presentations and each question was answered.
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The independent special committee of Brasil Telecom met on July 18, 2011. In addition to the members of the committee and the financial and legal
advisors of the committee, representatives of Brasil Telecom’s management and of Bank of America Merrill Lynch and Rothschild, financial advisors of the Oi Companies, also attended this meeting. At this meeting the committee, together with
Brasil Telecom’s management and its financial advisors, discussed the legal issues involving the financial participation agreements entered into in connection to the expansion plans of CRT. The committee also discussed the financial projections
of the Oi Companies, general aspects of telephone services market and the business plan for the Oi Companies. Presentations were made by Brasil Telecom’s management with respect to the financial projections of Brasil Telecom and Telemar. The
committee was advised that the projected growth of Brasil Telecom was lower than that of Telemar as a result of the contingencies relating to the lawsuits related to the financial participation agreements entered into in connection to the expansion
plans of CRT, the consolidation of the Oi Companies’ mobile telecommunication services into Telemar and the greater ability of Telemar to offer bundled services, which reduces the probability of losing fixed-line customers. The committee also
discussed the Brazilian telecommunication market in general and the role and participation of the Oi Companies in such market as the only “triple play” company in Brazil, comparing the Oi Companies to the other participants in the
Brazilian telecommunication market and analyzing the potential competitiveness of those companies with the Oi Companies.
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The independent special committee of TNL met on July 20, 2011. At this meeting the committee analyzed the documentation delivered by TNL as well
as a preliminary draft of the BTG Pactual’s presentation of financial analyses with respect to the Oi Companies. The committee also discussed alternative valuation methodologies that were not provided in the draft presentation. The committee
requested BTG Pactual to provide an analysis based on three-month moving averages and weighted-average market prices for different periods in addition to the methodologies included in the draft presentation.
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PART FIVE—THE MERGER
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The independent special committee of Brasil Telecom met on July 22, 2011. Itaú BBA presented a preliminary draft of its financial and
economic analysis of the Oi Companies. The committee discussed the need to convert preferred shares into common shares (in order to maintain the legal limit of preferred shares required by the Brazilian Corporation Law) and to exchange of
approximately 13 million Telemar preferred shares held by TmarPart for TNL common shares held by TmarPart’s shareholders so that TmarPart would retain a controlling interest in Brasil Telecom following the corporate reorganization as
required by the legal and regulatory obligations of TmarPart, including obligations to ANATEL. The committees also discussed further (1) the summary of the exchange ratios and the methodologies for the determination of the exchange ratios; and
(2) issues resulting from the corporate reorganization, particularly with respect to TmarPart maintaining control of Brasil Telecom.
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The independent special committee of TNL held two meetings on July 26, 2011. During these meetings, the committee confirmed the accuracy of the
information provided with respect to the exchange ratios in the Relevant Fact that first announced the corporate reorganization and discussed the draft presentation delivered by BTG Pactual on July 22, 2011. The committee requested that BTG
Pactual provide an explanation of the exchange ratios included in its draft presentation.
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The independent special committee of Brasil Telecom met on July 26, 2011. The committee discussed the valuations of the Oi Companies. The
committee held a conference call with its legal and financial advisors and decided that the negotiation with the other independent special committees should take place during meetings which are attended only by the members of the independent special
committees.
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The independent special committee of TNL met on July 29, 2011. During this meeting, the committee analyzed the presentation of BTG Pactual. The
committee determined that the weighted average market prices and discounted cash flow methodologies were the two most appropriate methodologies to form the basis for the committee’s official recommendation with respect to the exchange ratios.
The committee determined that the weighted average market prices during the period between March 29, 2011, the date of the capital increase of TNL and Telemar, and May 24, 2011, the date of the publication of the Relevant Fact that first
announced the corporate reorganization, was the most appropriate methodology. The committee noted that the discounted cash flow methodology did not take into account the difference between the prices of common and preferred shares. The committee
(1) rejected basing the exchange ratios on the comparable companies methodology, due to fact that TNL is a holding company and the impact that different growth rates and tax impacts could have on the results of the analysis, and
(2) rejected basing the exchange ratios on the book value methodology, due to the fact that it is a purely accounting concept that does not consider other relevant factors in connection with the establishment of market prices. As a result of
these considerations and the fact that the shares of TNL are highly liquid and included in the “IBOVESPA” index of the BM&FBOVESPA, the committee decided to use the weighted average market prices methodology to calculate the
recommended exchange ratios.
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The independent special committee of Brasil Telecom met on July 29, 2011 together with the independent special committee of TNL. At this meeting,
the members of both committees reviewed the information provided by their respective advisors with respect to the merger, discussed generally the merger, the timetable, the steps required for its completion and the process for communicating their
recommendations to the respective boards of directors. The committees also discussed the methodology for determining the exchange ratios and agreed that the method of comparing market prices of the shares of TNL and Brasil Telecom based on the
weighted average of the closing prices of those shares on the BM&FBOVESPA during the 30 days preceding May 24, 2011, the date of the publication of the Relevant Fact (
Fato Relevante
) that first announced the corporate reorganization
was the most appropriate. The committees also determined unanimously the exchange ratios taking into consideration the fact that the shares issued by Brasil Telecom are liquid and the proposed share dividend and redemption of Brasil Telecom.
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PART FIVE—THE MERGER
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On August 1, 2011, the independent special committee of TNL submitted a written recommendation to the board of directors of TNL recommending
unanimously that the board of directors of TNL adopt exchange ratios reflecting the issuance of (1) 2.3122 common shares of Brasil Telecom for each issued and outstanding common share of TNL, and (2) 1.8581 common shares of Brasil Telecom
or 2.1428 preferred shares of Brasil Telecom for each issued and outstanding preferred share of TNL.
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On August 4, 2011, the independent special committee of Brasil Telecom submitted a written recommendation to the board of directors of Brasil
Telecom recommending unanimously that the board of directors of Brasil Telecom adopt exchange ratios reflecting the issuance of (1) 2.3122 common shares of Brasil Telecom for each issued and outstanding common share of TNL, and (2) 1.8581
common shares of Brasil Telecom or 2.1428 preferred shares of Brasil Telecom for each issued and outstanding preferred share of TNL.
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Each of the members of the independent special committees of TNL and Brasil Telecom attended each of the meetings of the respective independent special committees described above.
While the independent special committees were appointed in compliance with one of the procedures recommended by the CVM and took an
active role in assisting in the negotiation of the exchange ratios and advising the boards of directors, U.S. holders of shares and ADS holders should understand that the role of the independent special committees differs in certain respects from
that of a traditional special committee appointed by a U.S. company in connection with a transaction similar to the merger. In particular, although the independent special committees were involved in the process of establishing the exchange ratios,
they did not determine these exchange ratios as such determination was made by the boards of directors.
Approval of the Merger by Our
Board of Directors
On July 13, 2011, we and TNL jointly selected and retained Apsis, as our financial advisor to
render valuation reports for the purpose of valuing the shares of TNL and our company in connection with the merger. The valuation reports were delivered to the boards of directors of TNL and our company on August 25, 2011.
On August 17, 2011, the boards of directors of TNL and our company each held extraordinary meetings which were also attended by the
members of the respective company’s independent special committee and representatives of the respective company’s financial advisor. At these meetings, the members of the independent special committees explained the steps taken to
determine the recommended exchange ratios. The board of directors of each company had the opportunity to discuss these steps with their respective independent special committees and the financial advisor to that special committee, after which they
approved the exchange ratios for the merger reflecting the issuance of (1) 2.3122 Brasil Telecom common shares for each issued and outstanding common share of TNL, and (2) 1.8581 Brasil Telecom common shares or 2.1428 Brasil Telecom
preferred shares for each issued and outstanding preferred share of TNL. In order to comply with the requirement of Brazilian law that shares without voting rights cannot represent more than two-thirds of Brasil Telecom’s share capital, the
boards of directors of TNL and our company determined that the holders of the preferred shares of TNL would receive both common shares and preferred shares of Brasil Telecom in the merger and determined that the exchange ratio applicable to the
preferred shares of TNL that would be submitted to the meetings of the boards of directors of TNL and our company called to consider and approve the merger would be 0.1879 Brasil Telecom common shares or 1.9262 Brasil Telecom preferred shares for
each issued and outstanding preferred share of TNL.
On August 25, 2011, the fiscal council of TNL reviewed the terms and
conditions of the merger and approved the merger.
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PART FIVE—THE MERGER
On August 26, 2011, the boards of directors of TNL and
our company held extraordinary meetings and approved the Merger Agreement containing the material terms and conditions of the merger, including the exchange ratios of (1) 2.3122 Brasil Telecom common shares for each issued and outstanding
common share of TNL, and (2) 0.1879 Brasil Telecom common shares and 1.9262 Brasil Telecom preferred shares for each issued and outstanding preferred share of TNL, that is being proposed in the merger. On the same date, our fiscal council
reviewed the terms and conditions of the merger and approved the merger.
On the same date, authorized executive officers of
TNL and our company entered into the Merger Agreement. The differences between the exchange ratios approved by the independent special committees and the boards of directors of Brasil Telecom and TNL reflect revisions required to comply with the
requirement of Brazilian law that the number of outstanding preferred shares of a public company cannot exceed two-thirds of the total number of its authorized shares.
Extraordinary General Shareholders’ Meetings
On , 2011, the
boards of directors of TNL and our company each called extraordinary general shareholders’ meeting to vote on the merger.
On , 2011, each
of TNL and our company published a notice of extraordinary general meetings of their respective common shareholders to vote on the merger.
Terms of th
e Merger
Gener
al
The merger must be approved at separate extraordinary general meetings of the shareholders of TNL and our company, which
are both scheduled to be held on , 2011. There are no conditions to the completion of the merger other than (1) shareholder
approval at the extraordinary general shareholder’s meetings called to consider the merger by (a) the affirmative vote of holders representing a majority of the total number of outstanding common shares of TNL, and (b) the affirmative
vote of holders representing a majority of the total number of outstanding common shares of Brasil Telecom, (2) approval of the split-off and share exchange and the Coari merger by the shareholders of Telemar, Coari and Brasil Telecom entitled
to vote with respect to these transactions (3) approval of the split-off and share exchange, the Coari merger and the merger by ANATEL, and (4) the declaration by the SEC that the registration statement of which this prospectus forms a
part is effective. Approval of the increase in the share capital of Brasil Telecom will require the affirmative vote of holders representing a majority of the total number of outstanding common shares of Brasil Telecom present at a duly convened
extraordinary general shareholders’ meeting.
If you hold common shares of TNL you may attend and vote at the TNL
extraordinary general shareholders’ meeting held to consider the merger. If you hold preferred shares of TNL, you are entitled to attend, but are not entitled to vote at, the TNL extraordinary general shareholders’ meeting held to consider
the merger. If you hold TNL ADSs, you are not entitled to attend the TNL Holding extraordinary general shareholders’ meeting.
If you hold TNL ADSs and wish to attend this meeting, you must surrender your TNL ADSs and receive delivery of the TNL preferred shares represented thereby in accordance with the terms of the deposit
agreement governing the TNL ADSs in sufficient time to allow your ownership of the TNL preferred shares to be reflected in the shareholder list that TNL will use to determine holders of preferred shares that are permitted to attend the meeting,
which generally reflects record ownership as of the fourth Brazilian business day prior to the meeting.
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PART FIVE—THE MERGER
We believe that the merger and the increase in the share
capital of Brasil Telecom will be approved at the applicable extraordinary general shareholders’ meetings because:
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our indirect controlling shareholder, TmarPart, which at the time of the extraordinary general shareholders’ meetings called to consider the
corporate reorganization, will directly and indirectly hold 68.3% of the outstanding voting share capital of TNL, has represented to us that it will cause the shares of TNL that it holds to be voted in favor of the merger; and
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TNL holds 98.0% of the outstanding voting share capital of Telemar, Telemar holds all of the outstanding voting share capital of Coari, Coari holds
79.6% of our outstanding voting share capital, and TmarPart has represented to us that it will cause Coari to vote the shares of Brasil Telecom that it holds in favor of the merger and the increase in the share capital of Brasil Telecom.
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After the merger is approved, holders of common shares of TNL will have 30 days from the date of the
publication of the minutes of the TNL extraordinary general shareholders’ meeting at which the merger was approved to exercise withdrawal rights. Under the Brazilian Corporation Law, if the management of TNL believes that the total value of the
withdrawal rights exercised by its shareholders may put at risk its financial stability, management may, within 10 days after the end of the withdrawal rights period, call an extraordinary general shareholders’ meeting of TNL to either unwind
or ratify the merger.
If the merger is approved:
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TNL will merge with and into Brasil Telecom, with Brasil Telecom as the surviving company;
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all TNL shares held in treasury prior to the merger will be cancelled, and all issued and then outstanding shares of Brasil Telecom held by TNL will be
cancelled, other than 24,646,937 common shares of Brasil Telecom, which will be held in treasury by Brasil Telecom;
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each issued and then outstanding common share of TNL (other than any common shares held by shareholders who exercise their withdrawal rights with
respect to such common shares) will be converted automatically into 2.3122 common shares of Brasil Telecom, plus cash in lieu of any fractional shares, without any further action by the holders thereof;
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each issued and then outstanding preferred share of TNL (including preferred shares of TNL represented by the TNL ADSs) will be converted automatically
into 0.1879 common shares of Brasil Telecom and 1.9262 preferred shares of Brasil Telecom, plus cash in lieu of any fractional shares, without any further action by the holders thereof;
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holders of TNL ADSs will receive, subject to the procedures described herein, 0.1879 Brasil Telecom Common ADSs and 0.6420 Brasil Telecom Preferred
ADSs for each TNL ADS they hold, plus cash in lieu of any fractional Brasil Telecom Common ADS or Brasil Telecom Preferred ADS; and
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TNL will cease to exist.
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The exchange ratios for the TNL preferred shares and ADSs are different because the ADS exchange ratio takes into account the difference in the ratio of ADSs to preferred shares under the TNL ADS program
and the Brasil Telecom ADS program. Each TNL ADS represents one preferred share, while each Brasil Telecom Common ADS represents one common share and each Brasil Telecom Preferred ADS represents three preferred shares.
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PART FIVE—THE MERGER
Merger Agree
ment
The Merger Agreement was entered into on August 26, 2011, and contains the terms by operation of which TNL is expected to merge with
and into our company. The following is a summary of the material terms of the Merger Agreement:
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only common shareholders of TNL will have withdrawal rights in connection with the merger;
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the corporate and/or voting rights of Brasil Telecom’s common and preferred shares will not change as a consequence of the merger;
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an extraordinary general shareholders’ meeting of TNL may, observing certain legal requirements, choose to unwind the merger after its approval,
if the aggregate number of shares the holders of which exercise withdrawal rights is so great that it may have a material adverse effect on TNL’s financial condition; and
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all shares of Brasil Telecom issued prior to or as a result of the merger will be entitled to the same rights as shares of Brasil Telecom outstanding
prior to the merger, including the right to receive dividends and interest on shareholders’ equity declared by Brasil Telecom on or after the date the merger is approved.
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Under the Merger Agreement, we will undergo a capital increase to reflect the increased capital stock of our company that will be
generated by the transfer of the total amount of the net equity of Coari and TNL into our company as a result of the Coari merger and the merger.
An English translation of the Merger Agreement is included as Exhibit 2.1 to the registration statement of which this prospectus is a part.
Increase in Brasil Telecom Share Capital and
Name Change
At the extraordinary general shareholders’ meeting of Brasil Telecom called to consider the merger, which will also consider the Coari merger, the holders of common shares of Brasil Telecom will also
vote to amend our bylaws to (1) increase our share capital to R$6,816,467,847.01 represented by 1,797,069,689 shares, consisting of 598,999,380 common shares and 1,198,070,309 preferred shares and (2) change our name from Brasil Telecom
S.A. to Oi S.A.
The Extraordinary General Sharehold
ers’ Meetings
Date, Time and Place of the Meetings
The extraordinary general shareholders’ meetings of TNL and Brasil Telecom to consider the merger are scheduled to be held as follows:
TNL
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2011 (Rio de Janeiro time)
Rua Humberto de Campos, 425/8° andar, Leblon 22430-190 Rio de Janeiro, RJ, Brazil
Brasil Telecom
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2011 (Rio de Janeiro time)
Rua General Polidoro, 99/5° andar, Botafogo 22280-004 Rio de Janeiro, RJ, Brazil
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PART FIVE—THE MERGER
Voting Rights under Brazilian Law
Under Brazilian law, in order to vote at an extraordinary general shareholders’ meeting, you must either appear in person and vote
your shares or appoint another shareholder, an executive officer of the applicable company, a financial institution or an attorney as your attorney-in-fact and that appointed person must appear at the meeting and vote your shares. Also, under
Brazilian law, you may be required to show documents proving your identity to gain admittance to the meeting, provided you are entitled to attend the meeting. If you appoint an attorney-in-fact to vote on your behalf at the meeting that person will
be required to show original or certified copies of the documents that grant him or her powers of representation.
There is no
record date for purposes of determining direct holders of common shares of TNL and Brasil Telecom entitled to vote. To determine the identities of holders of common shares entitled to vote at the extraordinary general shareholders’ meetings, we
and TNL will obtain shareholder lists from the respective registrars of our shares as of the latest practicable date prior to the date of the meetings. As a result of customary settlement procedures of the BM&FBOVESPA, these shareholder lists
generally reflect record ownership as of the fourth business day prior to the meeting.
If you are entitled to vote at one of
the extraordinary general shareholders’ meetings and you wish to exercise your voting rights but you do not want to, or are unable to, appear at the extraordinary general shareholders’ meeting in person, you may appoint a person to act on
your behalf at the meeting and vote your shares. If you grant a power of attorney under Brazilian law to someone to act for you at the meeting, your appointee will be required to show original or certified copies of the documents that grant him or
her powers of representation. The person acting on your behalf must be appointed to that purpose for less than one year prior to the date of the extraordinary shareholders’ meetings. The power of attorney must be deposited in properly notarized
and consularized form at the headquarters of TNL or Brasil Telecom, as the case may be, no later than 48 hours before the occurrence of the applicable extraordinary general shareholders’ meeting and may be revoked in accordance with Brazilian
law. Shareholders should confirm, with Brazilian counsel, that any power of attorney or revocation thereof delivered by them in connection with an extraordinary general shareholders’ meeting satisfies the requirements of Brazilian law, as
neither TNL nor Brasil Telecom will accept such forms or revocations if they do not comply with Brazilian law. Shareholders that have given a power of attorney may revoke it by issuing an instrument of revocation and depositing it, in properly
notarized and consularized form at the headquarters of TNL or Brasil Telecom, as the case may be, no later than 48 hours before the occurrence of the applicable extraordinary general shareholders’ meeting.
Abstentions are counted for purposes of establishing a quorum but are not counted as votes for or against any matter voted on at a
meeting.
If you are a holder of TNL or Brasil Telecom shares, none of TNL, Brasil Telecom, any of their affiliates or any
members of their respective boards of directors or the boards of directors of those affiliates is soliciting any proxy from you or requesting that you send a proxy or its equivalent to any of them. For your convenience we have described generally
below the procedure for voting your shares at the extraordinary general shareholders’ meetings but we urge you to consult Brazilian counsel with any questions on your voting rights or procedures. TmarPart, the controlling shareholder of TNL and
Brasil Telecom, and its affiliates hold, directly or indirectly, sufficient voting power to approve the merger without the support of any other shareholders of TNL or Brasil Telecom, and TmarPart has informed TNL and Brasil Telecom that it intends
to cause all of the TNL and Brasil Telecom shares that it owns, directly or indirectly, to be voted in favor of the merger.
Shareholders wishing to attend one of the extraordinary general shareholders’ meetings and who hold shares through the Fungible
Custody of Registered Shares of the Stock Exchange (
Custódia Fungível de Ações Nominativas das Bolsas de Valores
) must provide a statement containing their corresponding equity interest in the applicable company
dated within 48 hours of the applicable extraordinary general shareholders’ meeting.
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PART FIVE—THE MERGER
TNL
The following rules will apply with respect to attendance and voting at the TNL extraordinary general shareholders’ meeting held to
consider the merger:
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If you hold common shares of TNL, you may attend and vote at the TNL meeting.
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If you hold preferred shares of TNL, you may attend the TNL meeting, but you will not have any voting rights.
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If you hold TNL ADSs, you are not entitled to attend or vote at the TNL meeting.
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If you hold TNL ADSs and wish to attend this meeting, you must surrender your TNL ADS and withdraw the TNL preferred shares underlying
your TNL ADSs from the ADS program. To do so, you must (1) surrender to The Bank of New York Mellon, as TNL Depositary, at 101 Barclay Street, New York, NY 10286 (telephone: 1-888-BNY-ADRS), the TNL ADSs representing the preferred shares of TNL
that you wish to withdraw, (2) pay a fee to the TNL Depositary in the amount of up to US$5.00 per 100 TNL ADSs or portion thereof for the cancellation of those TNL ADSs, and (3) pay any taxes or governmental charges payable in connection
with its withdrawal of the preferred shares of TNL from the TNL ADS program. If you surrender TNL ADSs and receive preferred shares of TNL, the preferred shares so received will be registered at clearing and settlement chamber of the
BM&FBOVESPA, and you will need to obtain your own foreign investor registration under Resolution 2,689. You will need to take these steps in sufficient time to allow your ownership of the TNL preferred shares to be reflected in the shareholder
list that TNL will use to determine holders of TNL preferred shares that are permitted to attend the meeting, which generally reflects record ownership as of the fourth Brazilian business day prior to the meeting.
Brasil Telecom
The
following rules will apply with respect to attendance and voting at the Brasil Telecom extraordinary general shareholders’ meeting held to consider the merger:
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If you hold common shares of Brasil Telecom, you may attend and vote at the Brasil Telecom meeting.
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If you hold preferred shares of Brasil Telecom, you may attend the Brasil Telecom meeting, but you will not have any voting rights.
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If you hold Brasil Telecom ADSs, you are not entitled to attend or vote at the Brasil Telecom meeting. However, if you hold Brasil Telecom Common ADSs,
the deposit agreement governing the Brasil Telecom Common ADSs does not prohibit you from instructing the Brasil Telecom Depositary how to vote the shares represented by your Brasil Telecom ADSs.
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If you hold Brasil Telecom Common ADSs and wish to attend and vote in person at this meeting, or if you hold Brasil Telecom Preferred
ADSs and wish to attend this meeting, you must surrender you Brasil Telecom ADS and withdraw the Brasil Telecom common shares or preferred shares, as applicable, underlying your Brasil Telecom ADSs from the ADS program. To do so, you must
(1) surrender to The Bank of New York Mellon, as Brasil Telecom Depositary, at 101 Barclay Street, New York, NY 10286 (telephone: 1-888-BNY-ADRS), the Brasil Telecom ADSs representing the common shares or preferred shares, as applicable, of
Brasil Telecom that you wish to withdraw, (2) pay a fee to the Brasil Telecom Depositary in the amount of up to US$5.00 per 100 Brasil Telecom ADSs or portion thereof for the cancellation of those Brasil Telecom ADSs, and (3) pay any taxes
or governmental charges payable in connection with its withdrawal of the common shares or preferred shares of Brasil Telecom from the Brasil Telecom ADS program. If you surrender Brasil Telecom ADSs and receive common shares or preferred shares of
Brasil Telecom, the common shares or preferred shares so received will be registered at clearing and settlement chamber of the BM&FBOVESPA, and you will need to obtain your
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PART FIVE—THE MERGER
own foreign investor registration under Resolution No. 2,689. You will need to take these steps in sufficient time to allow your ownership of the Brasil Telecom common shares or preferred
shares to be reflected in the shareholder list that Brasil Telecom will use to determine holders of common shares that are permitted to attend and vote at the meeting and the holders of preferred shares that are permitted to attend the meeting,
which generally reflect record ownership as of the fourth Brazilian business day prior to the meeting.
Delivery of Brasil Telecom Shares a
nd ADSs
Delivery of Brasil Telecom Common Shares and Preferred Shares
If the merger is approved, by operation of law:
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each common share of TNL will automatically be converted into 2.3122 common shares of Brasil Telecom; and
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each preferred share of TNL will automatically be converted into 0.1879 common shares and 1.9262 preferred shares of Brasil Telecom.
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If you directly hold common or preferred shares of TNL, no further action by you is required. Because the
common shares and preferred shares of Brasil Telecom are book-entry shares, an entry or entries will be made in the share registry of Brasil Telecom to evidence the common shares and preferred shares of Brasil Telecom you will receive in the merger,
and neither you nor any other person will receive certificates evidencing common shares or preferred shares of Brasil Telecom. Following the auction of the fractional shares of Brasil Telecom resulting from the merger described under
“—Fractional Brasil Telecom Shares and ADSs,” Brasil Telecom also will pay you cash in lieu of any fractional Brasil Telecom shares to which you would have been entitled as a result of the merger.
Although the merger will be effective by operation of law once the requisite shareholder approvals have been obtained, the common shares
and preferred shares of TNL will continue to be listed on BM&FBOVESPA and be eligible for trading over the BM&FBOVESPA under their existing ticker symbols until the end of the period during which management of TNL is permitted pursuant to
Brazilian law to unwind the merger. Under the Brazilian Corporation Law, if the management of TNL believes that the total value of the withdrawal rights exercised by its shareholders may put at risk its financial stability, management may, within 10
days after the end of the withdrawal rights period, call an extraordinary general shareholders’ meeting of TNL to either unwind or ratify the merger.
Brasil Telecom has agreed with the BM&FBOVESPA that after the period during which management of TNL is permitted pursuant to Brazilian law to unwind the merger has ended, the Brasil Telecom common
shares and preferred shares issued in the merger will trade under the ticker symbol for Brasil Telecom’s common shares, “BRTO3,” and the ticker symbol for Brasil Telecom’s preferred shares, “BRTO4,” respectively. Upon
the completion of the merger we intend to change our name from Brasil Telecom S.A. to Oi S.A., and after the period during which management of TNL is permitted pursuant to Brazilian law to unwind the merger has ended, we intend to change the trading
symbols for the common shares and preferred shares of Brasil Telecom to “OION3” and “OIPN4,” respectively.
Delivery
of Brasil Te
lecom ADSs
If the merger is approved, holders of TNL ADSs, each of which
represents one preferred share of TNL, will receive, subject to the procedures described below, (1) 0.1879 Brasil Telecom Common ADSs, each representing one common share of Brasil Telecom, and (2) 0.6420 Brasil Telecom Preferred ADSs, each
representing three preferred shares of Brasil Telecom for each TNL ADS they hold, plus cash in lieu of any fractional ADSs. The terms of the Brasil Telecom ADSs that will be received in connection with the merger are described in “Part
Six—Shareholder Rights—Description of Brasil Telecom ADSs.”
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PART FIVE—THE MERGER
After the merger becomes effective and the end of the period
during which management of TNL is permitted pursuant to Brazilian law to unwind the merger, Brasil Telecom will deposit with the custodian for the TNL Depositary the Brasil Telecom common shares and preferred shares issuable in respect of the TNL
preferred shares then held in the TNL ADS program. The TNL Depositary will deposit those Brasil Telecom common shares and preferred shares with the custodian for the Brasil Telecom Depositary and instruct the Brasil Telecom Depositary to cause to be
issued and to deliver ADSs representing those Brasil Telecom common shares and preferred shares to the TNL Depositary. When the Brasil Telecom ADSs are received in the TNL ADS program, the TNL ADSs will represent a right to receive Brasil Telecom
Common ADSs and Brasil Telecom Preferred ADSs.
If you hold TNL ADSs indirectly through a broker or other intermediary, you
will automatically receive your Brasil Telecom ADSs (and cash in lieu of any fractions as described in “—Fractional Shares and ADSs”), subject to payment of the fees and expenses of the TNL Depositary and any applicable taxes.
If you hold TNL ADSs directly as a registered holder, you must surrender your ADRs, if any, representing TNL ADSs to the TNL
Depositary in accordance with instructions that will be provided to you. Registered holders of TNL ADSs will be provided with the necessary forms, including a letter of transmittal substantially in the form filed as Exhibit 99.8 to the registration
statement of which this prospectus is a part, which will contain instructions on how to surrender their ADRs, if any, representing TNL ADSs to the TNL Depositary. If you do not receive the necessary forms, you may call The Bank of New York Mellon
toll-free at 1-888-BNY-ADRS or contact The Bank of New York Mellon at 101 Barclay Street, New York, NY 10286. Upon delivery to the TNL Depositary of the completed and signed letter of transmittal, together with the TNL ADRs, if any, and payment of a
fee of up to $0.05 per ADS to the TNL Depositary in connection with the cancellation of your TNL ADSs plus any expenses of the TNL Depositary (including any fee charged by the Brasil Telecom Depositary for the issuance of Brasil Telecom ADSs) and
any applicable taxes, the TNL Depositary will deliver the Brasil Telecom ADSs to the registered holders of former TNL ADSs (and cash in lieu of any fractional ADSs as described in “—Fractional Shares and ADSs”).
During the period for the exercise of withdrawal rights by holders of TNL common shares to whom withdrawal rights are available and the
period during which management of TNL is permitted pursuant to Brazilian law to unwind the merger as described above, the TNL ADSs will continue to trade on the NYSE under their existing ticker symbol.
The Brasil Telecom Common ADSs and the Brasil Telecom Preferred ADSs are listed on the NYSE under the symbols “BTM.C” and
“BTM,” respectively. Upon the completion of the merger we intend to change our name from Brasil Telecom S.A. to Oi S.A. and to change the trading symbols for the ADSs representing our common shares and preferred shares to
“ ” and “ ,” respectively. We will
apply to list the Brasil Telecom Common ADSs and Brasil Telecom Preferred ADSs to be received by holders of TNL ADSs on the NYSE and following the completion of the merger, the Brasil Telecom Common ADSs and Brasil Telecom Preferred ADSs are
expected to trade under the symbols “ ” and
“ ,” respectively.
Fractional
Bras
il Telecom Shares and ADSs
If you hold common shares or preferred shares of TNL directly
and the exchange ratio in the merger would entitle you to receive fractional common shares or preferred shares of Brasil Telecom, the number of Brasil Telecom common shares or preferred shares that you will receive in the merger will be rounded down
to the largest whole number, and we will sell, in auctions on the BM&FBOVESPA, the aggregate of all fractional Brasil Telecom common shares and preferred shares. When your fractional Brasil Telecom shares are sold, you will receive in lieu of
the fractional Brasil Telecom shares to which you would otherwise be entitled as a result of the merger, cash based on the net proceeds after deducting applicable fees and expenses, including the fees
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PART FIVE—THE MERGER
charged by the BM&FBOVESPA and the Fungible Custody of Registered Shares of the Stock Exchange of 0.0285% and 0.006%, respectively, and the sales commissions charged by the brokerage firms
that Brasil Telecom will hire, from the sale on the BM&FBOVESPA of the aggregate number of fractional entitlements to Brasil Telecom common shares and preferred shares, as applicable. Payments for interests in fractional shares of Brasil Telecom
will be made within five business days after the date of the last auction. The sale of such fractional interests in auctions on the BM&FBOVESPA will occur as soon as practicable after due notice of the auctions are given in accordance with the
rules of the BM&FBOVESPA, which will occur after the completion of the merger and the end of the withdrawal period and the period during which the merger could be unwound.
If you hold TNL ADSs and the exchange ratio would entitle you to receive a fraction of a Brasil Telecom Common ADS or Brasil Telecom Preferred ADS, the number of Brasil Telecom Common ADS or Brasil
Telecom Preferred ADS you will receive in the merger will be rounded down to the largest whole number, and the TNL Depositary will try to sell on the open market the aggregate of all fractional Brasil Telecom ADSs. You will receive cash in lieu of
any fractional Brasil Telecom Common ADS or Brasil Telecom Preferred ADS you are entitled to receive based on the net proceeds (after deducting applicable fees, taxes and expenses, including sales commissions) from any sale on the NYSE of the
aggregate number of fractional entitlements to Brasil Telecom ADSs. Payments for interests in fractional Brasil Telecom ADSs will be available to registered holders as soon as practicable after the TNL Depositary completes sales of the aggregated
fractional Brasil Telecom ADSs on the NYSE.
You do not have to pay in cash any fees or commissions to TNL or the TNL
Depositary for the sale of your fractional common shares, preferred shares or Brasil Telecom ADSs because fees and expenses will have already been deducted from any amounts you receive.
With
drawal Rights
Under Article 137 of the
Brazilian Corporation Law, the holders of common shares of TNL that dissent from the merger have the right to withdraw their share capital from TNL and be reimbursed for the value of the common shares for which they were record holders at the close
of trading on May 24, 2011, the date of the Relevant Fact that first announced the merger.
You cannot exercise these withdrawal rights if you vote in favor of the merger.
The failure to vote on the merger at the TNL extraordinary general
shareholders’ meeting by a shareholder who would otherwise be entitled to exercise withdrawal rights will not constitute a waiver of that shareholder’s withdrawal rights.
If you hold TNL preferred shares (including TNL preferred shares represented by the TNL ADSs), you are not entitled to withdrawal rights
with respect to the merger.
Under the Brazilian Corporation Law, because the merger involves a controlling and controlled
company, we and TNL are required to disclose the ratio of the value of TNL common shares and Brasil Telecom common shares calculated based on the net worth calculated at market prices (as if the assets of Brasil Telecom and TNL had been sold), based
on valuation reports prepared by an independent financial advisor. This exchange ratio is required to be disclosed in order to provide the non-controlling shareholders with a parameter against which to evaluate the proposed merger and to determine
whether to dissent from the shareholder vote and exercise withdrawal rights. The applicable exchange ratio calculated based on the criteria of net worth calculated at market prices is 2.302004 Brasil Telecom common shares or preferred shares for
each TNL share of the same class.
Under the Brazilian Corporation Law, a shareholder who exercises a withdrawal right
generally is entitled to receive the net asset value of its shares based on the book value of the company’s assets and liabilities based on the company’s most recently approved financial statement. However, if the exchange ratio resulting
from the
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PART FIVE—THE MERGER
comparison of the net worth of TNL and BRT at market prices is more favorable then the one proposed to the non-controlling shareholders, the dissenting shareholders can elect to receive a
reimbursement value calculated based on the net worth at market prices in exchange for their withdrawn shares. As the exchange ratios proposed to the non-controlling shareholders of TNL in connection with the merger are more favorable then the one
resulting from the comparison of the net worth of TNL and Brasil Telecom at market prices, the dissenting shareholders at the extraordinary general shareholders’ meeting of TNL called to consider the merger will not be able to elect to receive
a reimbursement value calculated based on the net worth at market prices in exchange for their withdrawn shares, and will only be able to receive a reimbursement value based on the net asset value of TNL. Based on the net asset value of TNL
calculated using the book value of TNL’s assets and liabilities as set forth in the financial statements of TNL as of June 30, 2011, the withdrawal value per TNL common share is R$18.02.
Brasil Telecom and TNL retained Apsis to deliver valuation reports certifying (1) the net worth of each of Brasil Telecom and TNL
calculated at market prices (as if the assets of Brasil Telecom and TNL had been sold), and (2) the net asset value of the TNL common shares determined based on the book value of TNL’s assets and liabilities as of July 31, 2011, as
required by the Brazilian Corporation Law. Apsis’ valuation reports are included as exhibits to this registration statement and are incorporated herein by reference. See “—Presentations and Valuation Reports.”
If you have withdrawal rights, your withdrawal rights will lapse 30 days after publication of the minutes of the TNL extraordinary
general shareholders’ meeting at which the merger is approved. Once the 30-day period for the exercise of your withdrawal rights has expired, you will no longer have any right to compel TNL to redeem your TNL common shares. The minutes of the
TNL extraordinary general shareholders’ meeting, as well as a Relevant Fact (
Fato Relevante
) related to the approval of the merger, will be published in the newspapers in which TNL customarily publishes its notices on the business day
following the TNL extraordinary general shareholders’ meeting. Such publication will constitute your sole notification regarding the commencement of the period to exercise your withdrawal rights. If you notify TNL that you wish to exercise your
withdrawal rights, such request will be irrevocable.
To exercise its withdrawal rights, a shareholder holding TNL common
shares in custody with Banco do Brasil, the transfer agent for the shares of TNL, must appear, personally or through an attorney-in-fact, at any office of Banco do Brasil, during the 30-day period for the exercise of its withdrawal rights, complete
a form related to the exercise of the withdrawal rights, which is available in those offices, and surrender certified copies of the documents listed below:
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Individuals: Individual Taxpayers’ Register, Identity Card updated evidence of address (02 months at most);
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Legal Entity: National Corporate Taxpayers’ Register, bylaws/articles of association and corresponding amendments, as well as documents related to
the partners/legal representatives (act of appointment, Individual Taxpayers’ Register, Identity Card updated evidence of address).
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Shareholders represented by attorneys-in-fact must surrender the documents described above and the respective public power of attorney, which shall grant special powers to the attorney-in-fact authorizing
him to exercise, on behalf of the grantor, the withdraw rights and request the reimbursement for the TNL common shares.
Shareholders holding TNL common shares through the Fungible Custody of Registered Shares of the Stock Exchange must exercise their
withdrawal rights through their custody agents.
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PART FIVE—THE MERGER
Broke
rage Commissions and Depositary Fees
You will not have to pay any brokerage commissions in connection with the merger if your common shares or preferred shares
of TNL are registered in your name. If your common shares or preferred shares of TNL are held through a bank or broker or a custodian linked to a stock exchange, you should consult with them as to whether or not they charge any transaction fee or
service charges in connection with the merger.
If you hold TNL ADSs, you will have to pay a fee of up to $0.05 per ADS to the
TNL Depositary in connection with the cancellation of your TNL ADSs plus any expenses of the TNL Depositary (including any fee charged by the Brasil Telecom Depositary for the issuance of Brasil Telecom ADSs) and any applicable taxes as a condition
of receiving delivery of your new Brasil Telecom ADSs. In addition, you will have to pay any applicable stock transfer taxes with respect to the cancellation of your TNL ADSs or the issuance of Brasil Telecom ADSs to you.
Mailin
g of Prospectus
Brasil Telecom will mail the prospectus to record holders of common shares and preferred shares of TNL who are residents of the United States and whose names appear on the applicable shareholder lists.
Brasil Telecom will mail the prospectus to record holders of TNL ADSs whose names appear on the list of record holders of TNL ADSs maintained by the TNL Depositary and will also furnish the prospectus to brokers, banks and similar persons who are
listed as participants in a clearing agency’s security position listing for subsequent transmission to beneficial owners of TNL ADSs. If you hold common shares or preferred shares of TNL or TNL ADSs, you are receiving this prospectus because
Brasil Telecom may be deemed to be offering you its securities for purposes of the Securities Act.
Termination of TNL
ADS Program
TNL will instruct the TNL Depositary to mail notice to the owners of all outstanding TNL ADSs in
accordance with the deposit agreement governing the TNL ADSs to terminate that deposit agreement and the TNL ADS program as soon as practicable after the merger becomes effective and the period for the exercise of withdrawal rights and the period
during which the merger could be unwound have elapsed.
As soon as practicable after the expiration of one year from the date
the TNL ADS program has been terminated, the TNL Depositary may sell any deposited securities (for example, the Brasil Telecom Common ADSs and Brasil Telecom Preferred ADSs) remaining under TNL’s ADS program, and shall thereafter hold the
proceeds of the sale, net of fees, expenses and taxes, together with any other cash, without liability for interest, for the pro rata benefit of holders of TNL ADSs that have not theretofore surrendered their TNL ADSs.
After effecting such a sale, the TNL Depositary will be discharged from all obligations under the deposit agreement governing the TNL
ADSs, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the TNL Depositary and other expenses set forth in the deposit agreement governing the TNL ADSs for the surrender of ADSs and any applicable
taxes or other governmental charges) and certain indemnification obligations to TNL, and TNL will also be discharged from all obligations thereunder, except for certain indemnification obligations to the TNL Depositary and its agents.
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PART FIVE—THE MERGER
Presentations and Valuation
R
eports
The presentations and valuation reports discussed in this section have been
prepared based, in part, on prospective financial information prepared by the management of Brasil Telecom and TNL, or the prospective financial information. Brasil Telecom and TNL do not as a matter of course make public projections as to future
sales, earnings, or other results. However, the managements of these companies have prepared the prospective financial information in connection with the presentations and valuation reports. The prospective financial information was not
prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. The management of Brasil
Telecom and TNL are responsible for such information, and in their view, it was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management’s knowledge and belief, the
expected course of action and the expected future financial performance of Brasil Telecom and TNL. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this prospectus,
the presentations and the valuation reports are cautioned not to place undue reliance on the prospective financial information.
Neither the independent auditors of Brasil Telecom or TNL, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the prospective financial
information contained in the presentations or valuation reports, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the
prospective financial information.
The assumptions and estimates underlying the prospective financial information
included in the presentations and valuation reports are inherently uncertain and, though considered reasonable by the management of Brasil Telecom and TNL as of the date of its preparation, are subject to a wide variety of significant business,
economic, and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the prospective financial information, including, among others, the risks described in “Part Three—Risk
Factors—Risks Relating to the Brazilian Telecommunications Industry and Our Business” and “Part Three—Risk Factors—Risks Relating to the Merger.” Accordingly, there can be no assurance that the prospective results are
indicative of the future performance of Brasil Telecom and TNL or that actual results will not differ materially from those presented in the prospective financial information. Inclusion of the prospective financial information in the presentations
and valuation reports should not be regarded as a representation by any person that the results contained in the prospective financial information will be achieved.
Brasil Telecom and TNL do not generally publish their business plans and strategies or make external disclosures of their anticipated financial position or results of operations. Accordingly, Brasil
Telecom and TNL do not intend to update or otherwise revise the prospective financial information to reflect circumstances existing since its preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the
underlying assumptions are shown to be in error. Furthermore, Brasil Telecom and TNL do not intend to update or revise the prospective financial information to reflect changes in general economic or industry conditions.
Presentation o
f Itaú BBA
Brasil Telecom retained Itaú BBA as a financial advisor of the independent special committee of Brasil Telecom to perform certain valuation analyses in connection with the Coari merger and the
merger in order to assist the independent special committee of Brasil Telecom in its analysis and recommendation to the board of directors of Brasil Telecom. On July 29, 2011, Itaú BBA delivered its presentation, or the Itaú BBA
presentation, to the independent special committee of Brasil Telecom. An English translation of the full text of the Itaú BBA presentation is included as exhibit 99.3 to the registration statement of which this prospectus forms a part. The
Itaú BBA presentation was prepared in accordance with Guideline 35 and was not prepared to comply with any
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PART FIVE—THE MERGER
other legal or regulatory requirements either in Brazil or abroad. The following summary of the Itaú BBA presentation is qualified in its entirety by reference to, and should be reviewed
together with, the full text of the Itaú BBA presentation, including the information in the section entitled “Important Notes.” You are urged to read the entire Itaú BBA presentation and consider it carefully. Considering the
following summary without reviewing the full text of the Itaú BBA presentation, including the methodologies and assumptions underlying the analyses therein, could create a misleading or incomplete view of the Itaú BBA presentation. The
following quantitative information, to the extent it is based on market data, is, except as otherwise indicated, based on market data as it existed on or prior to March 31, 2011 and is not necessarily indicative of current or future market
conditions. The Itaú BBA presentation is not an expert opinion and should not be the basis of any decision in connection with the merger.
The Itaú BBA presentation was delivered to the independent special committee of Brasil Telecom for its exclusive use in analyzing and evaluating the Coari merger and the merger in accordance with
Guideline 35 and for no other purpose. The Itaú BBA presentation, including its analyses and conclusions, did not constitute a recommendation or guidance to the independent special committee of Brasil Telecom, to the Oi Companies or their
directors or shareholders, on how to proceed with respect to any decision related to the corporate reorganization. Any decision taken by Brasil Telecom and the recommendations made by the independent special committee of Brasil Telecom were based on
their own analysis of the risks and benefits involved in the corporate reorganization and are not the direct or indirect responsibility of Itaú BBA.
In preparing the Itaú BBA presentation, Itaú BBA:
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examined the consolidated financial statements of Brasil Telecom, TNL and Telemar for the year ended December 31, 2010, each audited by Deloitte Touche
Tohmatsu Auditores Independentes, and the unaudited consolidated financial statements of Brasil Telecom, TNL and Telemar for the three months ended March 31, 2011;
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held meetings with members of the management of Brasil Telecom, TNL and Telemar concerning the business, operations and prospects of those companies;
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examined certain publicly available business and financial information relating to each of Brasil Telecom, TNL and Telemar, as well as certain
financial forecasts and other information and data relating to each of Brasil Telecom, TNL and Telemar, which were provided by those companies to Itaú BBA;
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considered such other financial studies and analyses as Itaú BBA deemed appropriate, including financial, economic and market criteria.
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In preparing the Itaú BBA presentation, Itaú BBA assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to it, discussed with or reviewed by or for it, or publicly available. Itaú BBA did not assume any responsibility for independently verifying this information and did not
undertake an independent evaluation or appraisal of any of the assets or liabilities (whether contingent or not) of Brasil Telecom, TNL or Telemar and was not furnished with any such evaluation or appraisal, nor did Itaú BBA evaluate the
solvency or fair value of Brasil Telecom, TNL or Telemar under any laws related to bankruptcy, insolvency or similar matters. In addition, Itaú BBA did not assume any obligation to conduct any physical inspection of the properties or
facilities of Brasil Telecom, TNL or Telemar. With respect to the financial forecast information furnished to or discussed with Itaú BBA by Brasil Telecom, TNL or Telemar, Itaú BBA assumed that the information had been reasonably
prepared and reflected the best currently available estimates and judgment of the managements of Brasil Telecom, TNL and Telemar as to the expected future financial performance of those companies. Itaú BBA expressed no view as to such
forecasts or the assumptions on which they were based. Itaú BBA has not provided any legal, tax or accounting advice to the independent special committee of Brasil Telecom or to Brasil Telecom, TNL or Telemar in connection with the corporate
reorganization.
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PART FIVE—THE MERGER
The Itaú BBA presentation provides an estimate, based
on information received from Brasil Telecom, TNL and Telemar, or available from public sources, derived by applying certain valuation methodologies typically used in financial evaluations of companies and requested by the independent special
committee of Brasil Telecom, and does not evaluate any other aspect or implication of the corporate reorganization or any contract, agreement or understanding entered into in relation to the corporate reorganization. Itaú BBA did not, and the
Itaú BBA presentation does not, express any opinion or view as to the value of Brasil Telecom shares that will be issued in connection with the Coari merger or the merger or the prices at which shares of the Oi Companies actually will or
could be privately sold or publicly traded in the securities markets at any time following the announcement or consummation of the corporate reorganization. In addition, the Itaú BBA presentation is not and may not be used as: (1) an
opinion about the fairness and reasonability of the corporate reorganization, (2) a recommendation in relation to any aspects of the corporate reorganization, or (3) an opinion about the fairness of, or a recommendation with respect to,
any exchange ratio used in any step of the corporate reorganization. Furthermore, the Itaú BBA presentation does not deal with the strategic and commercial merits of the corporate reorganization, nor does it deal with any possible strategic
and commercial decision of any of the Oi Companies to carry out the corporate reorganization. The results presented in the Itaú BBA presentation refer to the corporate reorganization only and cannot be applied to any other present or future
decision or transaction related to the Oi Companies or the economic group to which they belong or the markets in which they operate. The Itaú BBA presentation does not constitute a judgment, opinion or recommendation to the management of
Brasil Telecom, the independent special committee of Brasil Telecom or to any third party, including the shareholders of any of the Oi Companies, in relation to the corporate reorganization, as it is not intended to serve as a basis for any
investment decision.
Itaú BBA’s analyses do not consider operating, tax or other benefits or losses of any type
whatsoever, including any possible premium, nor do they consider any synergies, incremental value and/or costs, if any, as of the completion of the corporate reorganization, if completed, or of any other transaction. Itaú BBA’s analyses
are not and should not be considered as a recommendation in relation to how the independent special committee of Brasil Telecom and the shareholders of any of the Oi Companies should vote in connection with the Coari merger or the merger, as
applicable. Itaú BBA has not been requested to take part and will not take part in the negotiation or structuring of the corporate reorganization, since its work was limited to providing financial advisory services to the independent special
committee of Brasil Telecom in connection with the analyses and negotiation of the exchange ratios in connection with the Coari merger and the merger.
The financial calculations contained in the Itaú BBA presentation may not always result in an accurate sum due to rounding.
Presentation of Financial Analyses
The economic value ranges of
Brasil Telecom, TNL and Telemar included in the Itaú BBA presentation were estimated based on the methodologies that the independent special committee of Brasil Telecom and Itaú BBA believes are the most widely used in financial and
economic valuations. Although Itaú BBA provided a range of exchange ratios under each methodology used in its analysis, it did not recommend to the independent special committee of Brasil Telecom exchange ratio ranges to be used in the Coari
merger or the merger. The exchange ratio ranges calculated under each methodology include an adjustment with respect to the valuation of Brasil Telecom of R$2.54 per share in connection with the issuance, distribution and redemption of the
redeemable shares by Brasil Telecom. The primary methodologies used in the valuation analyses included in the Itaú BBA presentation were:
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PART FIVE—THE MERGER
Market Price Metrics
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Simple average – market price
. Itaú BBA analyzed the share prices of each of Brasil Telecom, TNL and Telemar for the 30, 60, 90, 120
and 180-day periods prior to:
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May 24, 2011, the date of the publication of the Relevant Fact that first announced the corporate reorganization, and calculated an exchange ratio
based on simple averages utilizing the average closing price per share of Brasil Telecom, TNL and Telemar for these periods. This methodology resulted in an exchange ratio range of (1) 2.2755 to 2.4906 common shares of Brasil Telecom per common
share of TNL, (2) 2.1347 to 2.4290 preferred shares of Brasil Telecom per preferred share of TNL, (3) 1.8423 to 1.8968 common shares of Brasil Telecom per preferred share of TNL, (4) 4.7275 to 5.0983 common shares of Brasil Telecom
per common share of Telemar, (5) 4.4228 to 4.7566 preferred shares of Brasil Telecom per class A or class B preferred share of Telemar, and (6) 3.6509 to 3.8170 common shares of Brasil Telecom per class A or class B preferred share of
Telemar; and
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July 20, 2011, the cut-off date used by Itaú BBA for purposes of the compilation of market price averages, and calculated an exchange ratio
based on simple averages utilizing the average closing price per share of Brasil Telecom, TNL and Telemar for these periods. This methodology resulted in an exchange ratio range of (1) 1.9198 to 2.3699 common shares of Brasil Telecom per common
share of TNL, (2) 2.0079 to 2.2450 preferred shares of Brasil Telecom per preferred share of TNL, (3) 1.7240 to 1.8948 common shares of Brasil Telecom per preferred share of TNL, (4) 4.4297 to 4.9902 common shares of Brasil Telecom
per common share of Telemar, (5) 4.2075 to 4.5022 preferred shares of Brasil Telecom per class A or class B preferred share of Telemar, and (6) 3.6126 to 3.7999 common shares of Brasil Telecom per class A or class B preferred share of
Telemar.
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Weighted average – market price
. Itaú BBA analyzed the share prices of each of Brasil Telecom, TNL and Telemar for the 30, 60, 90,
120 and 180-day periods prior to:
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May 24, 2011, the date of the publication of the Relevant Fact that first announced the corporate reorganization, and calculated a weighted
average exchange ratio based on the volume-weighted average price per share of Brasil Telecom, TNL and Telemar for these periods. This methodology resulted in an exchange ratio range of (1) 2.3122 to 2.5373 common shares of Brasil Telecom per
common share of TNL, (2) 2.1428 to 2.4687 preferred shares of Brasil Telecom per preferred share of TNL, (3) 1.8402 to 1.9204 common shares of Brasil Telecom per preferred share of TNL, (4) 4.3352 to 5.1149 common shares of Brasil
Telecom per common share of Telemar, (5) 4.4537 to 4.8565 preferred shares of Brasil Telecom per class A or class B preferred share of Telemar, and (6) 3.6690 to 3.8620 common shares of Brasil Telecom per class A or class B preferred share
of Telemar; and
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July 20, 2011, the cut-off date used by Itaú BBA for purposes of the compilation of market price averages, and calculated a weighted
average exchange ratio based on the volume-weighted average price per share of Brasil Telecom, TNL and Telemar for these periods. This methodology resulted in an exchange ratio range of (1) 1.9459 to 2.3351 common shares of Brasil Telecom per
common share of TNL, (2) 2.0170 to 2.2482 preferred shares of Brasil Telecom per preferred share of TNL, (3) 1.7458 to 1.8794 common shares of Brasil Telecom per preferred share of TNL, (4) 4.4440 to 4.6965 common shares of Brasil
Telecom per common share of Telemar, (5) 4.1639 to 4.4942 preferred shares of Brasil Telecom per class A or class B preferred share of Telemar, and (6) 3.6041 to 3.8446 common shares of Brasil Telecom per class A or class B preferred share
of Telemar.
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Target price
. Itaú BBA calculated the exchange ratio based on the target prices published by equity research analysts affiliated with
various investment banks. Itaú BBA compiled the most recent target
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PART FIVE—THE MERGER
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prices published with respect to each of Brasil Telecom, TNL and Telemar, noting that there is no coverage of Telemar common shares and the most recent report available for Brasil Telecom common
shares was dated May 2009. Itaú BBA calculated the exchange ratio based on the average target prices for Brasil Telecom common shares and preferred shares, TNL common shares and preferred shares and Telemar preferred shares. This methodology
resulted in an exchange ratio of (1) 2.4117 common shares of Brasil Telecom per common share of TNL, (2) 2.1529 preferred shares of Brasil Telecom per preferred share of TNL, (3) 1.9248 common shares of Brasil Telecom per preferred
share of TNL, (4) 4.1919 preferred shares of Brasil Telecom per class A or class B preferred share of Telemar, and (5) 3.7477 common shares of Brasil Telecom per class A or class B preferred share of Telemar.
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Trading Multiples
Itaú BBA analyzed the Enterprise Value to EBITDA, or EV/EBITDA, trading multiples for a selected sample of comparable companies.
Itaú BBA calculated Enterprise Value based on the share prices of the comparable companies on July 19, 2011 and the net debt of the comparable companies based on their most recent publicly available financial statements. EBITDA of the
comparable companies was based on analysts’ projections for the respective companies. The independent committee of Brasil Telecom and Itaú BBA believe that Telecomunicações de São Paulo S.A. and TIM
Participações S.A. are the most relevant comparable companies due to the fact that their operations are located in Brazil. Itaú BBA’s analysis using EV/EBITDA multiples resulted in a minimum blended exchange ratio of 1.2978
shares of Brasil Telecom per share of TNL, a maximum blended exchange ratio of 1.3331 shares of Brasil Telecom per share of TNL, a minimum blended exchange ratio of 2.7716 shares of Brasil Telecom per share of Telemar and a maximum blended exchange
ratio of 2.8310 shares of Brasil Telecom per share of Telemar.
Discounted Cash Flow
Itaú BBA performed a discounted cash flow analysis to estimate a range of implied equity values per share as of March 31, 2011
for each of Brasil Telecom, TNL and Telemar, using a specified projection period from April 1, 2011 to December 31, 2020 and a terminal value calculation to capture the periods thereafter. The calculation of the estimated total equity
values for Brasil Telecom, TNL and Telemar adjusted the enterprise value of each company by (1) subtracting the value of (a) net debt/(cash) (including, where applicable, financial and fiscal indebtedness, outstanding authorization
payments, outstanding dividends payable and receivable, cash and cash equivalents and inter-company credit transactions) and (b) provisions for contingencies, and (2) adding the value of legal deposits. These adjustments reflect figures as
set forth in such company’s balance sheet as of March 31, 2011 filed with the CVM. The estimated total equity value of TNL included its 70.40% economic ownership of Telemar’s estimated total equity value and the estimated total equity
value of Telemar included its 49.28% economic ownership of Brasil Telecom’s estimated total equity value. The estimated total equity values per share for Brasil Telecom, TNL and Telemar were calculated by dividing the respective estimated total
equity values of Brasil Telecom, TNL and Telemar by 589.8 million shares, 467.5 million shares and 344.1 million shares, respectively.
The enterprise values for Brasil Telecom and Telemar were determined by adding (1) the “present value” of such company’s projected free cash flows from April 1, 2011 through 2020,
(2) the “present value” of the “terminal value” of such company’s projected free cash flows following the 10-year projection period referred to above, and (3) the “present value” of the tax savings
projected by each company. In the case of Brasil Telecom and Telemar, Itaú BBA calculated, on the basis of management’s forecasts, free cash flow as net operating profit less adjusted taxes,
plus
(1) depreciation and
amortization,
plus
or
minus
(2) changes in net working capital, and
minus
(3) capital expenditures. TNL’s enterprise value was determined by adding (1) the “present value” of its projected operating
expenses after taxes from April 1, 2011 through 2020 and (2) the “present value” of the “terminal value” of its projected operating expenses after taxes following the 10-year projection period referred
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PART FIVE—THE MERGER
to above. TNL’s projected operating expenses after taxes were calculated based on the operating expenses incurred in 2010 with growth projections based on inflation rates. “Present
value” refers to the current value of future cash flows obtained by discounting such future cash flows at a discount rate that reflects the weighted average cost of capital, or WACC, estimated for such companies. “Terminal value”
refers to the estimated value for the cash flows of a particular asset after the end of a specified projection period. The terminal value is estimated by multiplying the free cash flow in the last year of the projection period by one plus the
perpetuity growth rate and then dividing by the WACC rate minus the perpetuity growth rate. Free cash flow was calculated on the basis of projections in nominal
reais
which was converted to U.S. dollars using the projected exchange rate and
then discounted at the WACC rate in nominal U.S. dollars. The resulting estimated enterprise value in U.S. dollars was then converted back to
reais
using the exchange rate of 1.58
reais
per U.S. dollar.
Itaú BBA performed sensitivity analyses by varying the perpetuity growth rate from 1.3% to 3.3% and the WACC rate from 6.7% to
8.7% (in nominal U.S. dollars). Based on these sensitivity analyses, Itaú BBA derived a range of estimated total equity values as of March 31, 2011 of R$21.53 to R$40.63 per Brasil Telecom share, R$38.76 to R$99.27 per TNL share and
R$80.77 to R$197.79 per Telemar share. Applying a consistent comparison of the estimated equity values per share of Brasil Telecom, TNL and Telemar, Itaú BBA determined that (1) the minimum blended exchange ratio of shares of Brasil
Telecom per share of TNL was 2.1769 assuming a 8.2% WACC and a 1.8% perpetuity growth rate, (2) the maximum blended exchange ratio of shares of Brasil Telecom per share of TNL was 2.4585 assuming a 7.2% WACC and a 2.8% perpetuity growth rate,
(3) the minimum blended exchange ratio of shares of Brasil Telecom per share of Telemar was 4.4794 assuming a 8.2% WACC and a 1.8% perpetuity growth rate and (4) the maximum blended exchange ratio of shares of Brasil Telecom per share of
Telemar was 4.9475 assuming a 7.2% WACC and a 2.8% perpetuity growth rate.
Additional Information Relating to Itaú BBA and the
Itaú BBA Presentation
The preparation of the Itaú BBA presentation was a complex process that involved
an array of approaches to evaluate the most appropriate and relevant financial analysis methods as well as the application of such methods. Neither the reference to a specific analysis nor its order of appearance in the summary above is meant to
indicate that the analysis was given more weight than any other analysis. This summary is not a complete description of all of the analyses performed and factors considered by Itaú BBA, but rather is a summary of the material financial
analyses performed and factors considered by Itaú BBA. Selecting portions of the analyses or of the summary above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Itaú BBA’s
analyses. With respect to the comparable company analysis summarized above, such analysis reflects selected companies, and not necessarily all companies, that may be considered relevant in evaluating the corporate restructuring. In addition, no
company used as a comparison is either identical or directly comparable to Brasil Telecom, TNL or Telemar. These analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could
affect the public trading or acquisition values of the companies concerned.
The Itaú BBA presentation was necessarily
based upon the market, economic and other conditions as they existed and could be evaluated on, and on the information made available to Itaú BBA as of, the date of such presentation. Due to the limitations described above, Itaú BBA
has not and will not provide, either expressly or implicitly, any representation or warranty in relation to any information or forecasts used to prepare the Itaú BBA presentation. Moreover, the analyses contained in the Itaú BBA
presentation do not constitute assessments or reflect the prices for which the companies were actually acquired or sold, the real value of the shares when issued in a transaction, or the prices for which the securities could be sold at any time. If
any of such forecasts, or assumptions underlying such forecasts, is not fulfilled, or if the information proves to be incorrect, incomplete or inaccurate, the conclusions of the Itaú BBA presentation may be changed in a material manner.
Itaú BBA has no obligation to update or otherwise revise the Itaú BBA presentation.
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PART FIVE—THE MERGER
Itaú BBA provides a wide range of financial products
and investment banking services to Brasil Telecom and its affiliates, for which it receives compensation. Notwithstanding this fact, in connection with the preparation of the Itaú BBA presentation, Itaú BBA believes there are no facts
or circumstances that impair its independence or its ability to carry out its duties.
Itaú BBA’s qualifications
to render the valuation reports arise from its extensive experience as an internationally recognized consulting company engaged in, among others, the valuation of companies and other businesses and their securities in Brazil and elsewhere in
connection with mergers and acquisitions, restructurings, negotiated underwritings, competitive biddings, distributions of listed securities, private placements and valuations for corporate and other purposes. Itaú BBA was selected to prepare
the valuation reports based on its experience in preparing such reports and other factors. Upon delivery of the Itaú BBA presentation, Brasil Telecom paid Itaú BBA a fee of R$1.5 million for the preparation of the Itaú
BBA presentation.
Brasil Telecom has agreed to reimburse Itaú BBA for certain expenses and to indemnify Itaú
BBA and certain of its officers and directors against any and all liabilities for losses, damages, expenses and judicial claims, directly or indirectly, as a result of Itaú BBA’s engagement to produce the Itaú BBA presentation.
Itaú BBA does not take responsibility and shall not be held liable for any direct or indirect damage and/or loss or loss of profit that may arise from the Itaú BBA presentation.
In the normal course of its business, Itaú BBA has provided investment banking and banking services and financial services, in
general, as well as other financial services to the Oi Companies and to their respective affiliates from time to time in the past, for which Itaú BBA was compensated, and may, in the future, provide such services to the Oi Companies and to
their respective affiliates, for which Itaú BBA expects to be compensated. Itaú BBA and its affiliates provide a variety of financial services and other services related to securities, brokerage and investment banking. In the usual
course of its activities, Itaú BBA may purchase, hold or sell, on its behalf or on the behalf and at the behest of its customers, shares and other securities and financial instruments (including bank loans and other liabilities) of the Oi
Companies and of any other companies that may be involved in the corporate reorganization, and Itaú BBA may provide investment banking services and other financial services to such companies and their respective subsidiaries or parent
companies. The professionals in the research departments and other divisions of the Itaú Unibanco group, including Itaú BBA, may base their analyses and publications on different operating and market assumptions and on different
analysis methodologies when compared with those used in the preparation of the Itaú BBA presentation, so that the research reports and other publications prepared by them may contain results and conclusions that are different from those
described in the Itaú BBA presentation, considering that such analyses and reports are performed by analysts who are independent from any relationship with the professionals involved in the preparation of the Itaú BBA presentation.
Itaú BBA has adopted policies and procedures designed to protect the independence of its securities analysts, whose views may differ from those of the investment banking department. Itaú BBA has also adopted policies and procedures
designed to maintain informational barriers between the investment banking and the other areas and departments of Itaú BBA and other companies of Itaú Unibanco group, including but not limited to asset management, proprietary share
trading desk, debt instruments, securities and other financial instruments.
Presentation of BTG Pactual
The independent special committee of TNL retained BTG Pactual as a financial advisor to perform certain valuation analyses
in connection with the merger in order to assist the independent special committee of TNL in its analysis and recommendation to the board of directors of TNL. On July 29, 2011, BTG Pactual presented its valuation analyses to the independent special
committee of TNL, and on August 1, 2011, BTG Pactual delivered its valuation analyses, or the BTG Pactual presentation, to the independent special committee of TNL. An English translation of the full text of the BTG Pactual presentation is included
as exhibit 99.4 to the registration statement of which this prospectus forms a part. The following summary of the BTG Pactual presentation is qualified in its entirety by reference to, and should be reviewed together with, the full text of the
presentation,
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PART FIVE—THE MERGER
including the information in the section entitled “Additional Statements and Information.” You are urged to read the BTG Pactual presentation and consider it carefully. Considering the
following summary without reviewing the full text of the BTG Pactual presentation, including the methodologies and assumptions underlying the analyses therein, could create a misleading or incomplete view of the BTG Pactual presentation. The
following quantitative information, to the extent it is based on market data, is, except as otherwise indicated, based on market data as it existed at or prior to May 24, 2011 and is not necessarily indicative of current or future market
conditions. The BTG Pactual presentation is not an expert opinion and should not be the basis of any decision in connection with the merger.
The BTG Pactual presentation was delivered to the independent special committee of TNL for its exclusive use in analyzing and evaluating the merger and for no other purpose. The BTG Pactual presentation,
including its analyses and conclusions, did not constitute a recommendation or guidance to the independent special committee of TNL, to the Oi Companies or their directors or shareholders, on how to proceed with respect to any decision related to
the corporate reorganization. Any decision taken by TNL and the recommendations made by the independent special committee of TNL were based on their own analysis of the risks and benefits involved in the corporate reorganization and are not the
direct or indirect responsibility of BTG Pactual.
In preparing the BTG Pactual presentation, BTG Pactual:
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examined the unaudited consolidated financial statements of Brasil Telecom, TNL and Telemar for the three months ended March 31, 2011;
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held meetings with members of the management of Brasil Telecom, TNL, Telemar and their respective independent special committees concerning the
business, operations and prospects of those companies;
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examined certain publicly available business and financial information relating to each of Brasil Telecom, TNL and Telemar, as well as certain
financial forecasts and other information and data relating to each of Brasil Telecom, TNL, Telemar, which were provided by those companies to BTG Pactual;
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considered such other financial studies and analyses as BTG Pactual deemed appropriate, including financial, economic and market criteria.
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In preparing the BTG Pactual presentation, BTG Pactual assumed and relied on the accuracy and completeness
of all information supplied or otherwise made available to it, discussed with or reviewed by or for it, or publicly available. BTG Pactual did not assume any responsibility for independently verifying this information and did not undertake an
independent evaluation or appraisal of any of the assets or liabilities (whether contingent or not) of Brasil Telecom, TNL or Telemar and was not furnished with any such evaluation or appraisal, nor did BTG Pactual evaluate the solvency or fair
value of Brasil Telecom, TNL or Telemar under any laws related to bankruptcy, insolvency or similar matters. In addition, BTG Pactual did not assume any obligation to conduct any physical inspection of the properties or facilities of Brasil Telecom,
TNL or Telemar. With respect to the financial forecast information furnished to or discussed with BTG Pactual by Brasil Telecom, TNL or Telemar, BTG Pactual assumed that the information had been reasonably prepared and reflected the best currently
available estimates and judgment of the managements of Brasil Telecom, TNL and Telemar as to the expected future financial performance of such companies. BTG Pactual expressed no view as to such forecasts or the assumptions on which they were based.
BTG Pactual has not provided any legal, tax or accounting advice to the independent special committee of TNL or to Brasil Telecom, TNL or Telemar in connection with the corporate reorganization.
The BTG Pactual presentation does not constitute a judgment, opinion or recommendation to the management of TNL, the independent special
committee of TNL or to any third party, including the shareholders of Brasil Telecom, TNL or Telemar, in relation to the corporate reorganization, as it is not intended to serve as a basis for any investment decision.
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PART FIVE—THE MERGER
The financial calculations contained in the BTG Pactual
presentation may not always result in an accurate sum due to rounding.
Presentation of Financial Analyses
The economic value ranges of Brasil Telecom, TNL and Telemar included in the BTG Pactual presentation were estimated based on the
methodologies that BTG Pactual believes are the most widely used in financial and economic valuations. The primary methodologies used in the valuation analyses included in the BTG Pactual presentation were:
Discounted Cash Flow
BTG Pactual performed a discounted cash flow analysis to estimate a range of implied equity values per share of each of Brasil Telecom,
TNL and Telemar, as of December 31, 2010, using a projection period from January 1, 2011 to December 31, 2020. The calculation of the total equity value for Brasil Telecom adjusted its enterprise value by adding the value of
(1) net cash, calculated as the difference between (i) the sum of total indebtedness, provisions and contingencies, outstanding authorization payments and dividends payable, and (ii) the sum of cash, debentures issued by Telemar and
held by Brasil Telecom, and assets in escrow (judicial deposits) and (2) the “present value” of the tax benefit of the goodwill recognized on the acquisition of Brasil Telecom. The calculation of the total equity value for Telemar
adjusted its enterprise value by subtracting the value of net debt, calculated as the difference between (i) the sum of total indebtedness, provisions and contingencies, outstanding authorization payments and dividends payable, and
(ii) the sum of cash and assets in escrow (judicial deposits), and adding (1) the net cash attributable to non-controlling shareholders of Brasil Telecom, (2) the “present value” of Telemar’s 49.28% share of the tax
benefit of the Brasil Telecom goodwill recognized on the acquisition of Brasil Telecom, and (3) the “present value” of the tax benefit of Telemar’s accumulated losses. The calculation of the total equity value for TNL adjusted
its enterprise value by subtracting net debt at the holding level and the “present value” of its projected operating costs. With the exception of the “present values” which are explained below, these adjustments reflect figures
as set forth in such company’s unaudited balance sheet as of March 31, 2011. The total equity value of TNL included their 70.40% economic ownership of Telemar’s total equity value and the total equity value of Telemar included their
49.28% economic ownership of Brasil Telecom’s total equity value. The total equity values per share for Brasil Telecom, TNL and Telemar were calculated by dividing the respective total equity values of Brasil Telecom, TNL and Telemar by
590 million shares, 467 million shares and 344 million shares, respectively.
The enterprise value for Brasil
Telecom and Telemar was determined by adding (1) the “present value” of such company’s projected free cash flows from January 1, 2011 through 2020, and (2) the “present value” of the “terminal value”
of such company’s projected free cash flows following the 10-year projection period referred to above. “Present value” refers to the current value of future cash flows obtained by discounting such future cash flows at a discount rate
that takes into account macro-economic assumptions and estimates of risk, the opportunity cost of capital, expected returns, and other appropriate factors. “Terminal value” refers to the estimated value of the cash flows of a particular
asset after the end of a projection period. The terminal value is estimated by multiplying the free cash flow in the last year of the projection period by one plus the perpetuity growth rate and then dividing by the weighted average cost of capital,
or WACC, rate minus the perpetuity growth rate. In the case of Brasil Telecom and Telemar, BTG Pactual calculated, on the basis of management’s forecasts, free cash flow as earnings before interest, taxes, depreciation and amortization, or
EBITDA
minus
(1) income taxes, accounting for the tax shield from depreciation, amortization (excluding amortization of goodwill, which is valued separately) and interest on shareholders’ equity,
minus
(2) capital
expenditures, and
plus
or
minus
(3) changes in net working capital. Free cash flow was calculated on the basis of projections in nominal
reais,
than converted to U.S. dollars and then discounted at the WACC rate, also in
nominal U.S. dollars, as described below.
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PART FIVE—THE MERGER
In calculating the terminal values of Brasil Telecom and
Telemar’s business at the end of the initial 10-year projection period, BTG Pactual applied the perpetuity growth methodology to the forecasted free cash flow in 2020, with a range of perpetuity growth rates ranging from 1.5% to 3.5% (in
nominal U.S. dollars) and a WACC range of 8.5% to 11.0%. The free cash flows and terminal values were subsequently discounted using the WACC range specified above (in nominal U.S. dollars).
Based on these assumptions, BTG Pactual derived a range of total equity values as of December 31, 2010 of R$25.88 to R$60.55 per TNL
share, R$14.99 to R$25.25 per Brasil Telecom share and R$55.43 to R$122.57 per Telemar share. The range of total equity values for Brasil Telecom include an adjustment with respect to the valuation of Brasil Telecom of R$2.54 per share in connection
with the issuance, distribution and redemption of the redeemable shares by Brasil Telecom.
Book Value of Shareholders’ Equity
BTG Pactual calculated the book value of shareholders’ equity for each of Brasil Telecom, TNL and Telemar by dividing
shareholders’ equity by the total outstanding shares (excluding treasury shares) on March 31, 2011. Shareholders’ equity is calculated by subtracting (1) total liabilities and (2) non-controlling interest from total assets.
BTG Pactual’s analysis using the book value of shareholders’ equity resulted in an exchange ratio of 1.490 shares of Brasil Telecom per share of TNL.
Volume Weighted Average Price
BTG Pactual analyzed the share prices of
each of Brasil Telecom, TNL and Telemar for the period from March 29, 2011, the date of the capital increase of TNL and TMAR and the investment of Portugal Telecom in these companies, to May 23, 2011 and for the 15, 30, 45, 60, 90, 120,
180 and 360-day periods ending on May 24, 2011, the date of the publication of the Relevant Fact that first announced the corporate reorganization, and calculated a weighted average exchange ratio based on the volume-weighted average price per
share of Brasil Telecom, TNL and Telemar for these periods. BTG Pactual also calculated the average moving averages for the three-month period ending on May 24, 2011. This methodology resulted in an exchange ratio range of (1) 2.097 to
2.731 preferred shares of Brasil Telecom per preferred share of TNL, (2) 2.211 to 2.630 common shares of Brasil Telecom per common share of TNL and (3) 1.815 to 1.988 common shares of Brasil Telecom per preferred share of TNL. These
exchange ratio ranges include an adjustment with respect to the valuation of Brasil Telecom of R$2.54 per share in connection with the issuance, distribution and redemption of the redeemable shares by Brasil Telecom.
Selected Methodologies
BTG Pactual believes the most appropriate valuation methodologies for the determination of the exchange ratios in connection with the
merger are discounted cash flow and the volume weighted average prices methods. BTG Pactual believes that discounted cash flow is an appropriate valuation methodology because it reflects the intrinsic value of the relevant companies based on the set
of assumptions used to determine financial projections and the discount rate. However, the primary disadvantage when compared to an analysis based on market prices is that discounted cash flow does not differentiate between the prices of common and
preferred shares, which are historically different. BTG Pactual believes that volume weighted average prices is an appropriate valuation methodology because the common and preferred shares of both TNL and Brasil Telecom have adequate liquidity for
their prices to be considered representative and the Oi Companies have the benefit of wide and up-to-date coverage by the research analysts of various banks and brokerage houses.
BTG Pactual believes that book value of shareholders’ equity is a less appropriate valuation methodology in connection with the
merger because it is based on historical cost, which usually is significantly different that the market value of assets. In addition, BTG Pactual believes that the comparable companies trading multiples and precedent transaction multiples are not
appropriate valuation methodologies for purposes of the merger.
108
PART FIVE—THE MERGER
Conclusion
As a result of these analyses, BTG Pactual provided to the independent special committee of TNL the following indicative exchange ratio
ranges in connection with the merger: (1) 2.024 to 2.534 common shares of Brasil Telecom per common share of TNL, (2) 2.024 to 2.462 preferred shares of Brasil Telecom per preferred share of TNL and (3) 1.815 to 2.273 common shares of
Brasil Telecom per preferred share of TNL.
Additional Information Relating to BTG Pactual and the BTG Pactual Presentation
The preparation of the BTG Pactual presentation was a complex process that involved an array of approaches to evaluate
the most appropriate and relevant financial analysis methods as well as the application of such methods. Neither the reference to a specific analysis nor its order of appearance in the summary below is meant to indicate that the analysis was given
more weight than any other analysis. This summary is not a complete description of all of the analyses performed and factors considered by BTG Pactual, but rather is a summary of the material financial analyses performed and factors considered by
BTG Pactual. Selecting portions of the analyses or of the summary, without considering the analyses as a whole, could create an incomplete view of the processes underlying BTG Pactual’s analyses. With respect to the comparable company analysis
summarized, such analysis reflects selected companies, and not necessarily all companies, that may be considered relevant in evaluating the corporate restructuring. In addition, no company used as a comparison is either identical or directly
comparable to Brasil Telecom, TNL or Telemar. These analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or acquisition values of the
companies concerned.
The BTG Pactual presentation was necessarily based upon the market, economic and other conditions as
they existed and could be evaluated on, and on the information made available to BTG Pactual as of, the date of such presentation. Due to the limitations described above, BTG Pactual has not and will not provide, either expressly or implicitly, any
representation or warranty in relation to any information or forecasts used to prepare the BTG Pactual presentation. Moreover, the analyses contained in the BTG Pactual presentation do not constitute assessments or reflect the prices for which the
companies were actually acquired or sold, the real value of the shares when issued in a transaction, or the prices for which the securities could be sold at any time. If any of such forecasts, or assumptions underlying such forecasts, is not
fulfilled, or if the information proves to be incorrect, incomplete or inaccurate, the conclusions of the BTG Pactual presentation may be changed in a material manner. BTG Pactual has no obligation to update or otherwise revise the BTG Pactual
presentation.
In connection with its preparation of the BTG Pactual presentation, BTG Pactual represented that: (1) it
had no direct or indirect interest in TNL or Brasil Telecom, and that there was no significant circumstance that may characterize a conflict of interest for the issuance of the BTG Pactual presentation, and (2) there had been no attempt by the
controlling shareholders or management of TNL or Brasil Telecom to direct, limit, hinder or perform any action that might have affected the access to and the use and knowledge of any information, assets, documents or work methodologies relevant to
its conclusions.
BTG Pactual’s qualifications to render the valuation reports arise from its extensive experience as an
internationally recognized consulting company engaged in, among others, the valuation of companies and other businesses and their securities in Brazil and elsewhere in connection with mergers and acquisitions, restructurings, leveraged buyouts,
negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. BTG Pactual was selected to prepare the valuation reports based on its
experience in preparing such reports and other factors. Upon delivery of the BTG Pactual presentation, TNL paid BTG Pactual a fee of R$1.5 million for the preparation of the BTG Pactual presentation.
TNL has agreed to reimburse BTG Pactual for certain expenses and to indemnify BTG Pactual and certain of its officers and directors
against any and all liabilities for losses, damages, expenses and judicial claims,
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PART FIVE—THE MERGER
directly or indirectly, as a result of BTG Pactual’s engagement to produce the BTG Pactual presentation. BTG Pactual does not take responsibility and shall not be held liable for any direct
or indirect damage and/or loss or loss of profit that may arise from the BTG Pactual presentation. BTG Pactual will receive a fee in relation to the preparation of the BTG Pactual presentation regardless of the results of the proposed corporate
reorganization.
In the normal course of its business, BTG Pactual has provided investment banking and banking services and
financial services, in general, as well as other financial services to the Oi Companies and to their respective affiliates from time to time in the past, for which BTG Pactual was compensated, and may, in the future, provide such services to the Oi
Companies and to their respective affiliates, for which BTG Pactual expects to be compensated. BTG Pactual and its affiliates provide a variety of financial services and other services related to securities, brokerage and investment banking. In the
usual course of its activities, BTG Pactual may purchase, hold or sell, on its behalf or on the behalf and at the behest of its customers, shares and other securities and financial instruments (including bank loans and other liabilities) of the Oi
Companies and of any other companies that may be involved in the corporate reorganization, and BTG Pactual may provide investment banking services and other financial services to such companies and their respective subsidiaries or parent companies.
The professionals in the research departments of BTG Pactual, may base their analyses and publications on different operating and market assumptions and on different analysis methodologies when compared with those used in the preparation of the BTG
Pactual presentation, so that the research reports and other publications prepared by them may contain results and conclusions that are different from those described in the BTG Pactual presentation, considering that such analyses and reports are
performed by analysts who are independent from any relationship with the professionals involved in the preparation of the BTG Pactual presentation. BTG Pactual has adopted policies and procedures designed to protect the independence of its
securities analysts, whose views may differ from those of the investment banking department. BTG Pactual has also adopted policies and procedures designed to maintain informational barriers between the investment banking and the other areas and
departments of BTG Pactual, including but not limited to asset management, proprietary share trading desk, debt instruments, securities and other financial instruments.
Valuation Repor
ts of Apsis
Apsis has been
engaged by Brasil Telecom and TNL to render valuation reports for the purpose of appraising:
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the market value of the shareholders’ equity of Brasil Telecom and TNL as of June 30, 2011 for purposes of Article 264 of the Brazilian
Corporation Law, which requires disclosure to shareholders of the ratio of the value of TNL shares and Brasil Telecom shares based on this appraisal in order to provide non-controlling shareholders with a parameter against which to evaluate the
proposed merger and to determine whether to dissent from the shareholder vote and exercise their withdrawal rights. Based on this appraisal, the exchange ratio determined on this basis would be 2.302004 Brasil Telecom common shares or preferred
shares for each TNL share of the same class.
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the book value of the shareholders’ equity of TNL as of June 30, 2011 for purposes of Articles 8, 226 and 227 of the Brazilian Corporation
Law, which requires an appraisal of the shares of TNL to determine the amount of the capital reduction of Brasil Telecom that will result from the merger. Apsis concluded that, for these purposes, the book value of the shareholders’ equity of
TNL is R$8,426,204,248.24 and the merger will result in a R$1,117,802,971.45 reduction of Brasil Telecom’s capital.
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The valuation reports prepared by Apsis are subject to the assumptions, considerations and limitations described in the valuation reports and summarized in this prospectus. The valuation reports are not
to be used by any other person or for any other purpose, and are not intended to be and do not constitute a recommendation to any shareholder as to how such shareholder should vote on any matters relating to the merger. Apsis did not
110
PART FIVE—THE MERGER
make a recommendation with respect to the exchange ratios for the merger, which were determined by the independent special committee of Brasil Telecom and the independent special committee of TNL
and approved by the applicable board of directors on August 17, 2011. The full valuation reports for Brasil Telecom and TNL are included in the Protocol of Merger and Instrument of Justification that has been filed as Exhibit 2.1 to the
registration statement of which this prospectus is a part. Copies of these exhibits may be obtained as described in “Incorporation by Reference.” The summary of the Apsis valuation reports set forth below is qualified in its entirety by
reference to the full text of the reports.
Brasil Telecom urges you to read carefully the entire valuation reports prepared by Apsis
.
Summary of Valuation Reports of Market Value of Shareholders’ Equity of Brasil Telecom and TNL
The valuation reports of market value of shareholders’ equity of Brasil Telecom and TNL prepared by Apsis were presented to the board
of directors of each of Brasil Telecom and TNL on August 25, 2011 for use in consideration of the merger. This summary of the valuation report is qualified in its entirety by reference to the full text of the report.
Apsis was engaged by Brasil Telecom and TNL to render a valuation report solely for the purposes of calculating the exchange ratios of
TNL shares for Brasil Telecom shares, based on an appraisal of the market value of the shareholder’s equity of both Brasil Telecom and TNL, under the same criteria and on the same dates, for the purposes of Article 264 of the Brazilian
Corporation Law and based upon and subject to the assumptions, considerations and limitations set forth in the valuation report.
The technical procedures employed in preparing the valuation report comply with the appraisal criteria established by Apsis in accordance with Brazilian Corporate Law, and the calculations to determine
the value of the assets were based on the income, assets and market approach. The valuation report presents the assets and liabilities of Brasil Telecom and TNL at market values, as used to adjust the book value of the shareholder’s equity of
Brasil Telecom and TNL based on the assets approach.
In rendering the valuation report, Apsis held discussions with
representatives of both Brasil Telecom and TNL concerning the nature of their assets and liabilities in order to calculate the market value and adjust the book value of the shareholders’ equity of each of Brasil Telecom and TNL. Such
information did not take into account potential operating synergies arising out of the corporate reorganization, and the valuation report does not reflect any such synergies. Apsis also performed technical visits in order to conduct a physical
inspection of the property, plant and equipment of Brasil Telecom and TNL and their operating subsidiaries.
The valuation
report was also based on the financial statements of Brasil Telecom and TNL as of and for the six-month period ended June 30, 2011.
The managements of each of Brasil Telecom and TNL have advised Apsis that the financial information of each of Brasil Telecom and TNL, respectively, as of and for the six-month period ended June 30,
2011, was prepared in accordance with IFRS. Brasil Telecom and TNL have directed Apsis to rely on such financial information, and Apsis has not performed an independent verification of such financial information and does not assume responsibility
therefore.
In addition, in preparing the valuation report, Apsis assumed and relied on the accuracy, completeness and
reasonableness of all financial and other information and data supplied or otherwise made available to it, discussed with or reviewed by or for it, or publicly available. In addition, Apsis assumed an obligation to conduct a physical inspection of
the properties and facilities of Brasil Telecom and TNL and their subsidiaries.
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PART FIVE—THE MERGER
For the purpose of its valuation analyses, Apsis did not take
into account tax-related effects that TNL’s shareholders may experience in connection with the corporate reorganization or any fees and expenses that may be incurred in connection with the settlement of those transactions.
The valuation report is necessarily based on information available to Apsis and financial, stock market and other conditions and
circumstances existing and disclosed to Apsis as of the date of the valuation report.
Apsis has no obligation to update or
otherwise revise the valuation report should any future events or conditions affect its valuation analyses or conclusions.
The scope of Apsis’ valuation analyses was limited to the appraisal of the market value of the shareholder’s equity of each of
Brasil Telecom and TNL under the same criteria and on the same dates, for the purposes of Article 264 of the Brazilian Corporation Law and did not address, among other matters:
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the treatment given to different classes of shares of Brasil Telecom or TNL, as the case may be;
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any other transaction relating to the shares of Brasil Telecom or TNL, other than the other steps of the corporate reorganization, as the case may be;
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the underlying business decision of Brasil Telecom and TNL to effect the merger, and
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the prices at which Brasil Telecom or TNL securities, as the case may be, may actually be sold.
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The valuation report is not intended to be and does not constitute a recommendation or opinion to Brasil Telecom and TNL, nor does it
constitute a recommendation or opinion to any shareholder of Brasil Telecom or TNL, as to any matters relating to the merger, including as to how shareholders should vote on the merger.
The following is a summary of the material analyses undertaken by Apsis in connection with the rendering of the valuation report. The
summary includes information presented in tabular format.
In order to fully understand the methodologies used by Apsis, the tables must be read together with the text of the summary. These tables alone do not constitute a complete description of
the analyses.
Using the financial statements provided by management of each of Brasil Telecom and TNL, Apsis performed
adjustments on the book value of their respective assets and liabilities, based on the assets approach to determine net equity at market value. This methodology is derived from IFRS, under which financial statements are prepared based on the
historical cost principle (i.e., acquisition cost). Based on this and basic accounting principles, the methodology used presumes book value of a company’s assets minus the book value of its liabilities is equal to the book value of its
shareholders’ equity. This methodology first considers the book value of the assets and liabilities, and requires adjustments to some of these items to reflect their likely market values. The result of this method gives an initial basis to
estimate a company’s value, and a useful basis to compare the results of other methodologies. The assets approach is designed to evaluate a company’s value by adjusting the book values (net balance) to their respective fair market values.
The assets and liabilities deemed relevant are evaluated at their fair market value, and these values are compared to their respective book values (net balance).
The general appraisal criteria used to adjust the assets subject to appraisal at market price are detailed in the valuation report.
The adjustments discussed above, duly analyzed, are added to book value of shareholder’s equity to determine a company’s market
value by the assets approach. The fair market value of a company will be the shareholders’ equity, as adjusted to reflect the market value of the appraised assets and liabilities.
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PART FIVE—THE MERGER
Market Value of Shareholders’ Equity of Brasil Telecom
The table below shows the market value of Brasil Telecom’s shareholders’ equity, including the adjustments
to its principal accounts.
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Unaudited Balance Sheet as of June 30, 2011
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Brasil Telecom
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Opening
Balance
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Subsequent
Event (1)
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Subtotal
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Market
Adjustments
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As
Adjusted
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(in millions of
reais
)
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Current assets
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R$
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20,127
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R$
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(1,502
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)
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R$
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18,625
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R$
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(628
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)
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R$
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17,998
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Long-term assets
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17,099
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—
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17,099
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—
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17,099
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Investments
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57
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—
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57
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—
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57
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Fixed assets
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19,741
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—
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19,741
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11,033
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30,774
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Intangible assets
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3,467
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—
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3,467
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—
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3,467
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Total assets
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R$
|
60,492
|
|
|
R$
|
(1,502
|
)
|
|
R$
|
58,990
|
|
|
R$
|
10,406
|
|
|
R$
|
69,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
R$
|
14,685
|
|
|
R$
|
(1,502
|
)
|
|
R$
|
13,183
|
|
|
R$
|
—
|
|
|
R$
|
13,183
|
|
|
Non-current liabilities
|
|
|
30,151
|
|
|
|
—
|
|
|
|
30,151
|
|
|
|
3,538
|
|
|
|
33,688
|
|
|
Participation of non-controlling shareholders
|
|
|
37
|
|
|
|
—
|
|
|
|
37
|
|
|
|
16
|
|
|
|
54
|
|
|
Shareholders’ equity
|
|
|
15,619
|
|
|
|
—
|
|
|
|
15,619
|
|
|
|
6,851
|
|
|
|
22,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
R$
|
60,492
|
|
|
R$
|
(1,502
|
)
|
|
R$
|
58,990
|
|
|
R$
|
10,406
|
|
|
R$
|
69,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued prior to the merger.
|
Market Value of Shareholders’ Equity of TNL
The table below shows the market value of TNL’s shareholders’ equity, including the adjustments to its principal accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Balance Sheet as of June 30, 2011
|
|
|
TNL
|
|
Opening
Balance
|
|
|
Subsequent
Event (1)
|
|
|
Subtotal
|
|
|
Market
Adjustments
|
|
|
As
Adjusted
|
|
|
|
|
(in millions of
reais
)
|
|
|
Current assets
|
|
R$
|
549
|
|
|
R$
|
—
|
|
|
R$
|
549
|
|
|
R$
|
—
|
|
|
R$
|
549
|
|
|
Long-term assets
|
|
|
435
|
|
|
|
—
|
|
|
|
435
|
|
|
|
(3
|
)
|
|
|
432
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in subsidiaries
|
|
|
18,325
|
|
|
|
(8,774
|
)
|
|
|
9,551
|
|
|
|
4,186
|
|
|
|
13,737
|
|
|
Other Investments
|
|
|
8
|
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
|
18,333
|
|
|
|
(8,774
|
)
|
|
|
9,558
|
|
|
|
4,186
|
|
|
|
13,745
|
|
|
Fixed assets
|
|
|
8
|
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
8
|
|
|
Intangible assets
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
R$
|
19,326
|
|
|
R$
|
(8,774
|
)
|
|
R$
|
10,551
|
|
|
R$
|
4,183
|
|
|
R$
|
14,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
1,710
|
|
|
|
—
|
|
|
|
1,710
|
|
|
|
—
|
|
|
|
1,710
|
|
|
Non-current liabilities
|
|
|
415
|
|
|
|
—
|
|
|
|
415
|
|
|
|
(1
|
)
|
|
|
414
|
|
|
Shareholders’ equity
|
|
|
17,200
|
|
|
|
(8,774
|
)
|
|
|
8,426
|
|
|
|
4,184
|
|
|
|
12,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
R$
|
19,326
|
|
|
R$
|
(8,774
|
)
|
|
R$
|
10,551
|
|
|
R$
|
4,183
|
|
|
R$
|
14,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents reversal of the effects of the allocation of the purchase price recorded in connection with the acquisition of Brasil Telecom.
|
113
PART FIVE—THE MERGER
Ratio of the Value of Shares of TNL to Brasil Telecom
The following table shows the calculation of the exchange ratio determined on the basis of the market value of the
shareholders’ equity of Brasil Telecom and TNL, based on the market values of the shareholders’ equity of Brasil Telecom and TNL determined as described above.
Shareholders’ Equity at Market Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Brasil
Telecom
|
|
|
TNL
|
|
|
Shareholders’ equity at market value (in millions of
reais
)
|
|
|
22,470
|
|
|
|
12,611
|
|
|
Outstanding shares (in thousands)
|
|
|
1,921,929
|
|
|
|
468,550
|
|
|
Shareholders’ equity per share at market value (in
reais
) (1)
|
|
|
11.691586
|
|
|
|
26.914081
|
|
|
Exchange ratio (2)
|
|
|
2.302004
|
|
|
|
|
|
|
(1)
|
Adjusted to reflect the exclusion of treasury stock.
|
|
(2)
|
Reflects number of shares of Brasil Telecom that would be issued in exchange for each TNL share on the basis of the market value of the shareholders’ equity of
Brasil Telecom and TNL.
|
Summary of Valuation Report of Book Value of Shareholders’ Equity of TNL
The valuation report of book value of shareholders’ equity of TNL prepared by Apsis was presented to the board of directors of each
of Brasil Telecom and TNL on August 25, 2011 for use in consideration of the merger. This summary of the valuation report is qualified in its entirety by reference to the full text of the report.
Apsis was engaged by Brasil Telecom and TNL to render a valuation report solely for the purposes of appraising the book value of the
shareholders’ equity of TNL (other than shares held in treasury) as of June 30, 2011 for purposes of Article 8, 226 and 227 of the Brazilian Corporation Law, based upon and subject to the assumptions, considerations and limitations set
forth in the valuation report, to determine the amount of the capital reduction of Brasil Telecom that will result from the merger.
The valuation report presents the assets and liabilities of TNL at book values adjusted to reflect the merger.
In rendering the valuation report, Apsis held discussions with representatives of both Brasil Telecom and TNL concerning the nature of the assets and liabilities of TNL in order to calculate the book
value of its shareholders’ equity. The analysis of the balance sheets of Brasil Telecom and TNL was designed to ascertain whether bookkeeping was accurately conducted and was in compliance with the legal, regulatory, normative, statutory and
contractual provisions which govern the matter, within the scope of IFRS.
The valuation report was also based on the
financial statements of TNL as of June 30, 2011.
The management of TNL has advised Apsis that the financial information
of TNL as of June 30, 2011 was prepared in accordance with IFRS. TNL has directed Apsis to rely on such financial information, and Apsis has not performed an independent verification of such financial information and does not assume
responsibility therefore.
In addition, in preparing the valuation report, Apsis assumed and relied on the accuracy,
completeness and reasonableness of all financial and other information and data supplied or otherwise made available to it, discussed with or reviewed by or for it, or publicly available.
114
PART FIVE—THE MERGER
For the purpose of its valuation analyses, Apsis did not take
into account tax-related effects that TNL’s shareholders may experience in connection with the merger, or any fees and expenses that may be incurred in connection with the settlement of that transaction.
The valuation report is necessarily based on information available to Apsis and financial information as well as other existing
conditions and circumstances disclosed to Apsis as of the date of the valuation report.
Apsis has no obligation to update or
otherwise revise the valuation report should any future events or conditions affect its valuation analyses or conclusions.
The scope of Apsis’ valuation analyses was limited to the appraisal of the book value of the shareholder’s equity of TNL and
did not address, among other matters:
|
|
•
|
|
the treatment given to different classes of shares of TNL;
|
|
|
•
|
|
any other transaction relating to the shares of TNL;
|
|
|
•
|
|
the underlying business decision of TNL to effect the merger, and
|
|
|
•
|
|
the prices at which TNL securities may actually be sold.
|
The valuation report is not intended to be and does not constitute a recommendation or opinion to Brasil Telecom and TNL, nor does it constitute a recommendation or opinion to any shareholder of Brasil
Telecom or TNL, as to any matters relating to the merger, including as to how shareholders should vote on the merger.
Below is a summary of the material analyses undertaken by Apsis in connection with the rendering of its valuation report. The
summary includes information presented in tabular format.
In order to fully understand the methodologies used by Apsis, the table must be read together with the text of the summary. The tables alone do not constitute a complete description of the
analyses.
In conducting its valuation, Apsis used the book valuation approach, as it considered such method to be the
most appropriate in determining the value of a merger of companies of the same business group. This approach was also considered appropriate by Apsis because TNL’s shares had not been exposed to any fact or situation that may have caused
the overvaluation of such shares.
Using the financial statements provided by the management of TNL, Apsis performed an
analysis of the book value of its assets and liabilities. This methodology is derived from IFRS, in which an analysis of the balance sheets of Brasil Telecom and TNL is made, designed to ascertain whether bookkeeping was accurately conducted and was
in compliance with the legal, regulatory, normative, statutory and contractual provisions which govern the matter. The result of this method gives a basis to confirm the company’s book value. Apsis’ analysis was conducted and the valuation
report was prepared in accordance with the rules and regulations of the CVM.
Through Apsis’ examination of the relevant
documents and its analysis, Apsis concluded that the shareholders’ equity, based on the book valuation report, of TNL was R$8,426,204,248.24, as of June 30, 2011.
115
PART FIVE—THE MERGER
The table below shows TNL’s shareholders’ equity at
book value as of June 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TNL
|
|
Unaudited Balance Sheet as of June 30, 2011
|
|
|
|
|
Opening
Balance
|
|
|
Subsequent
Event (1)
|
|
|
Subsequent
Event (2)
|
|
|
Subsequent
Event (3)
|
|
|
Subsequent
Event (4)
|
|
|
Total
|
|
|
|
|
(in millions of
reais
)
|
|
|
Current assets
|
|
R$
|
549
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
R$
|
549
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term assets
|
|
|
435
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
435
|
|
|
Permanent assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telemar Norte Leste S.A.
|
|
|
14,642
|
|
|
|
(215
|
)
|
|
|
(14,427
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Coari Participações S.A.
|
|
|
—
|
|
|
|
209
|
|
|
|
14,427
|
|
|
|
(14,636
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Brasil Telecom S.A.
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,318
|
|
|
|
(8,774
|
)
|
|
|
9,544
|
|
|
Other
|
|
|
14
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
|
14,656
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
3,683
|
|
|
|
(8,774
|
)
|
|
|
9,558
|
|
|
Fixed assets
|
|
|
8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
|
|
Intangible assets
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total permanent assets
|
|
|
14,666
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
3,683
|
|
|
|
(8,774
|
)
|
|
|
9,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
15,101
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
3,683
|
|
|
|
(8,774
|
)
|
|
|
10,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
R$
|
15,649
|
|
|
R$
|
(6
|
)
|
|
R$
|
—
|
|
|
R$
|
3,683
|
|
|
R$
|
(8,774
|
)
|
|
R$
|
10,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing
|
|
R$
|
1,508
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
R$
|
1,508
|
|
|
Other current liabilities
|
|
|
202
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,710
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,710
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing
|
|
|
220
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
220
|
|
|
Other non-current liabilities
|
|
|
195
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
415
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
R$
|
2,125
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
R$
|
2,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
R$
|
7,255
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
R$
|
—
|
|
|
R$
|
7,255
|
|
|
Capital reserves available
|
|
|
1,202
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,202
|
|
|
Non-available capital reserves
|
|
|
117
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
117
|
|
|
Distributable profit reserves
|
|
|
6,359
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,359
|
|
|
Non-distributable profit reserves
|
|
|
451
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
451
|
|
|
Treasury stock
|
|
|
(353
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(353
|
)
|
|
Equity valuation adjustments
|
|
|
(1,535
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
3,683
|
|
|
|
(8,774
|
)
|
|
|
(6,627
|
)
|
|
Net income
|
|
|
28
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
R$
|
13,524
|
|
|
R$
|
(6
|
)
|
|
R$
|
—
|
|
|
R$
|
3,683
|
|
|
R$
|
(8,774
|
)
|
|
R$
|
8,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
R$
|
15,649
|
|
|
R$
|
(6
|
)
|
|
R$
|
—
|
|
|
R$
|
3,683
|
|
|
R$
|
(8,774
|
)
|
|
R$
|
10,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book equity value of TNL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R$
|
8,426
|
|
|
Shares of Brasil Telecom owned by TNL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R$
|
(9,544
|
)
|
|
Net book equity value to be merged into Brasil Telecom
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R$
|
(1,118
|
)
|
|
(1)
|
Represents the split-off
|
|
(2)
|
Represents the share exchange.
|
|
(3)
|
Represents the Coari merger
|
|
(4)
|
Represents the reversal of the effects of the allocation of the purchase price recorded in connection with the acquisition of Brasil Telecom.
|
116
PART FIVE—THE MERGER
Additional Information Relating to Apsis and the Valuation Reports
The preceding discussion is a summary of the materials furnished by Apsis to the boards of directors of each of Brasil
Telecom and TNL, but it does not purport to be a complete description of the analyses performed by Apsis. The preparation of the valuation reports is a complex process involving technical judgments and is not necessarily adequately represented by
partial analyses or summary description. Accordingly, Apsis believes that its analyses, and the summary set forth above, must be considered as a whole, and that selecting portions of the analyses, without considering all of the analyses and factors,
could create a misleading or incomplete view of the processes underlying the analyses conducted by Apsis and the valuation reports.
In its analyses, Apsis made numerous assumptions with respect to Brasil Telecom and TNL, their respective subsidiaries, industry performance, general business, economic, market and financial conditions
and other matters, many of which are beyond the control of Brasil Telecom, TNL and Apsis. Any estimates contained in Apsis’ analyses are not necessarily indicative of actual values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by these analyses. Estimates of the values of companies do not purport to be appraisals or necessarily to reflect the prices at which companies may actually be sold. Because these estimates
are inherently subject to uncertainty, none of Brasil Telecom, TNL, Apsis, their respective affiliates or any other person assumes responsibility if future results or actual values differ materially from the estimates.
In connection with its preparation of the valuation reports, Apsis represented that: (1) it had no direct or indirect interest in
Brasil Telecom or TNL, and that there was no significant circumstance that may characterize a conflict of interest for the issuance of its report, and (2) there had been no attempt by TNL’s controlling shareholders or management to direct,
limit, hinder or perform any action that might have affected the access to and the use and knowledge of any information, assets, documents or work methodologies relevant to its conclusions.
Apsis’ qualifications to render the valuation reports arise from its extensive experience as an internationally recognized
consulting company engaged in, among others, the valuation of companies and other businesses and their securities in Brazil and elsewhere in connection with mergers and acquisitions, restructurings, leveraged buyouts, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. Apsis was selected to prepare the valuation reports based on its experience in preparing such
reports and other factors. Apsis will be paid a fee by Brasil Telecom and TNL, which have also agreed to reimburse Apsis’ expenses.
Accounting Treat
ment of the Merger
Consistent
with the accounting for the Coari merger, since these entities are under common control, Brasil Telecom will account for the merger based on the carry-over basis of the individual assets received and liabilities assumed of TNL. The effects of the
purchase accounting relating to TNL’s acquisition of Brasil Telecom will not be “pushed down” to the assets and liabilities of Brasil Telecom in its consolidated financial statements as a result of the merger.
117
PART FIVE—THE MERGER
Management of Brasil
Telecom
Our board of directors (
conselho de administração
) and our board of executive officers
(diretoria
) are responsible for operating our business.
Board of Dir
ectors
Our board of directors is a decision-making body responsible for, among other things, determining policies and guidelines for our business
and our wholly-owned subsidiaries and controlled companies. Our board of directors also supervises our board of executive officers and monitors its implementation of the policies and guidelines that are established from time to time by the board of
directors. Under the Brazilian Corporation Law, our board of directors is also responsible for hiring independent accountants.
Our bylaws provide for a board of directors of from three to seven members and from three to seven alternate members. As of the date of
this prospectus, our board of directors is composed of five members and five alternate members. During periods of absence or temporary unavailability of a regular member of our board of directors, the corresponding alternate member substitutes for
the absent or unavailable regular member.
The members of our board of directors are elected at general meetings of
shareholders for three-year terms and are eligible for reelection. The terms of all current members expire at our annual shareholders’ meeting in 2014. Members of our board of directors are subject to removal at any time with or without cause
at a general meeting of shareholders. Although our bylaws do not contain any citizenship or residency requirements for members of our board of directors, the members of our board of directors must be shareholders of our company. Our board of
directors is presided over by our chief executive officer, and, in his absence, on an interim basis, by his designated alternate. The chairman of our board of directors is elected at a general meeting of shareholders from among the members of our
board of directors, serves for a three-year term and is eligible for reelection.
Our board of directors ordinarily meets once
every month and extraordinarily when a meeting is called by the chairman or any two other members of our board of directors. Decisions of our board of directors require a quorum of a majority of the directors and are taken by a majority vote of
those directors present.
The following table sets forth certain information with respect to the current members of our board
of directors and their alternates:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Position
|
|
Member Since
|
|
Age
|
|
|
José Mauro Mettrau Carneiro da Cunha
|
|
Chairman
|
|
February 2009
|
|
|
61
|
|
|
José Augusto da Gama Figueira
|
|
Alternate
|
|
February 2009
|
|
|
63
|
|
|
João de Deus Pinheiro Macedo
|
|
Vice Chairman
|
|
February 2009
|
|
|
63
|
|
|
Eurico de Jesus Teles Neto
|
|
Alternate
|
|
February 2009
|
|
|
54
|
|
|
Vacancy
|
|
Director
|
|
|
|
|
|
|
|
Júlio César Fonseca
|
|
Alternate
|
|
April 2011
|
|
|
51
|
|
|
Francis James Leahy Meaney
|
|
Director
|
|
April 2011
|
|
|
46
|
|
|
Maxim Medvedovski
|
|
Alternate
|
|
February 2009
|
|
|
39
|
|
|
João Carlos de Almeida Gaspar (1)
|
|
Director
|
|
April 2011
|
|
|
47
|
|
|
Antonio Cardoso dos Santos (1)
|
|
Alternate
|
|
April 2011
|
|
|
61
|
|
|
(1)
|
Elected by the preferred shareholders.
|
We summarize below the business experience, areas of expertise and principal outside business interests of our current directors and their alternates.
118
PART FIVE—THE MERGER
Directors
José Mauro Mettrau Carneiro da Cunha.
Mr. Cunha has served as chairman of our board of directors since February 2009
and as chairman of the board of directors of Tele Norte Leste Participações S.A., or TNL, since April 2007. He has also been an alternate director of TmarPart since April 2008, and was a member of the board of directors of Telemar from
April 1999 to July 2002, before he rejoined the board of directors of Telemar, as chairman, in April 2007. He served as our interim Chief Executive Officer during June and July 2011. Mr. Cunha has held several executive positions at BNDES, and
was a member of its board of executive officers from 1991 to 2002. He was the vice president of strategic planning of Braskem S.A. from February 2003 to October 2005, and was a business consultant from November 2005 to February 2007. He was a member
of the board of directors of Braskem S.A. from July 2007 to April 2010, Light Serviços de Eletricidade S.A. from December 1997 to July 2000, Aracruz Celulose S.A. from June 1997 to July 2002, FUNTTEL from December 2000 to January 2002,
FUNCEX- Fundação Centro de Estudos do Comércio Exterior from June 1997 to January 2002, and Politeno Indústria e Comércio S.A. from April 2003 to April 2005. Mr. Cunha holds a bachelor’s degree in
mechanical engineering from Universidade Católica de Petrópolis in Rio de Janeiro and a master’s degree in industrial and transportation projects from Instituto Alberto Luiz Coimbra de Pós-Graduação (COPPE) at
Universidade Federal do Rio de Janeiro. He attended the Executive Program in Management at the Anderson School at the University of California in Los Angeles.
João de Deus Pinheiro de Macêdo.
Mr. Macêdo has served as the vice chairman of our board of directors since February 2009 and is the planning officer of TNL.
Mr. Macêdo served as business officer of Telemar Matriz from August 1998 to April 2000, and from May 2000 to September 2001 he served as individual client officer at the Rio de Janeiro branch. From 1985 to 1998, he served as the
operations officer at Telecomunicações da Bahia S.A., or Telebahia, and was responsible for customer service, sales, operations and plant maintenance. In 1971, he started his career at Telebahia as supervisor of implementation and
maintenance. At Telebahia, he managed the equipment division, the department of capital operations and the department of marketing and services. Mr. Macêdo holds a bachelor’s degree in electric and electronic engineering from
Universidade Federal da Bahia (UFBA). He attended a course in Transmission Systems (NEC Corp. and OKI Electric Industry Co., Ltd.—Japan), Digital Switching (Nippon Telegraph & Telephone Corp.— Japan) and Quality Management
(Japan).
Francis James Leahy Meaney.
Mr. Meaney has served as one of directors since April 2011. He has
also served as one of our executive officers since February 2011 and as an executive officer at TNL since February 2011. Mr. Meaney founded Contax and served as its chief executive officer from its incorporation in 2000 until 2010. He has
served in several organizations of the contact center industry, including as vice president of the Brazilian Association of Contact Center Companies—ABT from November 2005 until January 2011. Previously he served as the vice-president of Global
Crossing Latin America, in Miami, from 1999 to 2000, managing director of Conectel, the largest paging company in Brazil from 1997 to 1999, and administrative consultant for several customer service companies in Latin America from 1990 to 1997. He
started his career at Credit Suisse First Boston in New York, where he has worked from 1986 to 1988. Mr. Meaney has a bachelor’s degree in economics from Notre Dame University and a master’s in Business Administration from Harvard
Business School. He also completed the Advanced Management Program at INSEAD.
João Carlos de Almeida
Gaspar.
Mr. Gaspar was elected to our board of directors as a nominee of our preferred shareholders in April 2011 and has been a member of the board of directors of Telemar since April 2008. He worked as an investment manager of a family
office from 1998 until 2003 when he founded Unity Capital Gestão de Investimentos. He has worked for the capital markets areas of several companies, including Supra Corretora de Valores, Banco Iochpe de Investimentos and Itaú CCVM. He
was a member of the boards of directors and audit committees for several telecommunications companies, including Telepará S.A., CRT S.A., Telesc Celular S.A., Telepar Celular S.A. and Brasil Telecom. He holds a law degree and an MBA from
IBMEC.
119
PART FIVE—THE MERGER
Alternate Directors
José Augusto da Gama Figueira.
Mr. Figueira has served as an alternate member of our board of directors since April
2011. He has served as a director of TmarPart since April 2008, an executive officer of TmarPart since June 1999, an alternate director of TNL since March 2007, and an alternate director of Telemar since 2002. He previously served as a member of our
board of directors from February 2009 to April 2011 and as an alternate member of TNL’s board of directors from April 2003 to March 2004. He has also served as president of Instituto Telemar since August 2001. He was an executive officer of
Pegasus, a company in the Andrade Gutierrez Group, from July 1997 to August 1999, and a member of the fiscal council of Telecomunicações do Espírito Santo S.A., Telecomunicações do Piauí S.A. and
Telecomunicações do Amazonas S.A. from April to December 1999. He holds a bachelor’s degree in electrical engineering from the Universidade do Estado do Rio de Janeiro and an MBA from FGV.
Eurico de Jesus Teles Neto.
Mr. Neto has served as an alternate member of our board of directors since April 2011 and is also
the legal officer of Telemar, a position that he has held since April 2007. Mr. Neto previously served as a member of our board of directors from February 2009 to April 2011 and as legal manager of Telemar from April 2005 to April 2007. He
previously served as manager of the real estate division at Telebahia starting in 1980, where he went on to hold the position of legal consultant in 1990. Mr. Neto holds a bachelor’s degree in economics and a degree in legal sciences from
Universidade Católica de Salvador. He holds a post graduate degree in Employment Law from Estácio de Sá.
Júlio César Fonseca.
Mr. Fonseca has served as an alternate member of our board of directors since April 2011. He has also served as People Management Director at Oi since
December 2009. He has been an executive officer of TNL since August 2010. He has 28 years of experience working in the human resources areas of large Brazilian and multinational companies, directly managing people and teams, with broad expertise in
change management processes, especially in the context of mergers, acquisitions, privatizations and professionalizing family-run companies. He served as human resources manager at Ferrovia Centro Atlântica
S.A., from April 1997 to
December 1999, and at Companhia de Materiais Sulforosos Matsulfur S.A., from
May
1995 until April 1997. Mr. Fonseca holds a bachelor’s degree in Psychology from PUC-MG, an Executive MBA from the Dom Cabral Foundation in
Minas Gerais, and completed the Advanced Management Program in Corporate Management from INSEAD, France.
Maxim
Medvedovsky.
Mr. Medvedovsky has served as an alternate member of our board of directors since February 2009, as one of our executive officers since May 2011, as an executive officer of TNL since February 2010 and previously served as the
administrative officer of Grupo Oi from January 2009 until January 2010. Mr. Medvedovsky was the officer responsible for the shared services center of Grupo Oi from March 2006 to December 2008, the officer responsible for relations with service
providers of Telemar from 2004 to 2006, and the officer responsible for interconnection and roaming of Oi from 2001 to 2004. He started at Telemar in September 1998 as corporate planning manager. Mr. Medvedovsky worked on the privatization
process of Sistema Telebrás at Banco Patrimônio / Salomon Brothers, and was responsible for the appraisal of TNL. He also previously served as telecommunications analyst at Banco Patrimônio in 1998 and as telecommunications
analyst
and resources manager of Banco Icatu from 1994 to 1998. Mr. Medvedovsky holds a bachelor’s degree in
Electric Engineering from Pontifícia Universidade Católica – Rio de Janeiro and an MBA from
Fundação Dom Cabral (FDC) and FGV.
Antonio Cardoso dos Santos.
Mr. Cardoso was elected as
an alternate member of our board of directors as a nominee of our preferred shareholders in April 2011. He previously served as a member of board of directors as a nominee of our preferred shareholders since March 2008. He was a member of the board
of directors of Telemig Celular S.A. from 2004 until 2007, a member of the board of directors of Amazônia Celular from 2004 to 2007, a member of the board of directors of Telecomunicações do Pará S.A. in 2001 and a member
of the board of
120
PART FIVE—THE MERGER
directors of Telecomunicações de Santa Catarina S.A. in 1999. Mr. Cardoso has also served as a member of the fiscal council of Companhia Telefônica Melhoramento e
Resistência, Telecomunicações do Paraná S.A., Telebahia, Telecomunicações do Mato Grosso S.A., Telecomunicações de Rondônia S.A., Telecomunicações do Piauí S.A.,
Telecomunicações do Rio Grande do Norte S.A., Telecomunicações de Goiás S.A., Telecomunicações de Brasília S.A. and CRT. Mr. Cardoso received a bachelor’s degree in business
administration from São Paulo Superior School of Business Administration and holds a Latu Sensu Graduate degree in Business Management from Associação de Ensino Unificado do Distrito Federal (AEUDF).
Board of Executi
ve Officers
Our board of executive officers is our executive management body. Our executive officers are our legal representatives and are responsible for our internal organization and day-to-day operations and the
implementation of the general policies and guidelines established from time to time by our board of directors.
Our bylaws
require that the board of executive officers consist of between five to nine members, including a chief executive officer. Each officer is responsible for business areas that our board of directors assigns to them. The members of our board of
executive officers, other than our chief executive officer have no formal titles (other than the title of executive officer or “
Diretor
”), although the board of directors may assign specific attributions, such as chief financial
officer, investor relations officer and chief operations officer.
The members of our board of executive officers are elected
by our board of directors for three-year terms and are eligible for reelection. The current term of all of our executive officers ends on the date after our first board of directors’ meeting following our annual shareholders’ meeting in
2012. Our board of directors may remove any executive officer from office at any time with or without cause. According to the Brazilian Corporation Law, executive officers must be residents of Brazil but need not be shareholders of our company. Our
board of executive officers holds meetings when called by our chief executive officer.
The following table sets forth certain
information with respect to the current members of our board of executive officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Position
|
|
Date Elected/
Appointed
|
|
|
Age
|
|
|
Francisco Tosta Valim Filho
|
|
Chief Executive Officer
|
|
|
August 2011
|
|
|
|
47
|
|
|
Alex Waldemar Zornig
|
|
Chief Financial Officer and
Investor Relations Officer
|
|
|
January 2009
|
|
|
|
53
|
|
|
Francis James Leahy Meaney
|
|
Executive Officer
|
|
|
February 2011
|
|
|
|
46
|
|
|
Maxim Medvedovsky
|
|
Executive Officer
|
|
|
May 2011
|
|
|
|
39
|
|
|
Tarso Rebello Dias
|
|
Executive Officer
|
|
|
May 2011
|
|
|
|
40
|
|
Summarized below is information regarding the business experience, areas of expertise and principal
outside business interests of our current executive officers.
Francisco Tosta Valim Filho
. Mr. Valim has served
as our chief executive officer since August 1, 2011. He has also served as the chief executive officer of TNL and Telemar since August 1, 2010. From January 2008 to July 2011, Mr. Valim was the chief executive officer of Serasa Experian
and chief operating officer of Experian for Latin America, Europe and the Middle East. Prior to working at Experian, he served as chief executive officer of NET Serviços de Comunicação S.A. from February 2003 to January 2008,
chief financial officer of TNL PCS S.A. (Oi) from January 2002 to February 2003; and vice-president and chief financial officer of RBS Participações S.A. from September 1989 to December 2001. Mr. Valim holds a MBA degree in business
administration from Marshal School of Business – University of Southern California.
121
PART FIVE—THE MERGER
Alex Waldemar Zornig
. Mr. Zornig has served as
our chief financial officer and investor relations officer since January 2009. Mr. Zornig has served as the chief financial officer and investor relations officer of TNL since November 2008 and the chief financial officer and investor relations
officer of Telemar since November 2008. He began his career at PriceWaterhouse where he worked for 14 years (including three years in London) and last served in the capacity of an officer. He served as chief financial officer—head of corporate
administrative services at BankBoston, where he worked for 13 years (including two years in Boston). He served as an officer at Banco Itaú from May 1993 to August 2007. Prior to joining our company, Mr. Zornig was an executive vice
president at Banco Safra, where he was in charge of all support areas of the bank from September 2007 to November 2008. Mr. Zornig holds a bachelor’s degree in accounting from the Universidade de São Paulo, an MBA from FGV and a
post-graduate degree from the London Business School.
Francis James Leahy Meaney.
Mr. Meaney has served as one of
our executive officers since February 2011, as a member of our board of directors since April 2011 and as an executive officer at TNL since February 2011. Mr. Meaney founded Contax and served as its chief executive officer from its
incorporation in 2000 until 2010. He has served in several organizations of the contact center industry, including as vice president of the Brazilian Association of Contact Center Companies—ABT from November 2005 until January 2011. Previously
he served as the vice-president of Global Crossing Latin America, in Miami, from 1999 to 2000, managing director of Conectel, the largest paging company in Brazil from 1997 to 1999, and administrative consultant for several customer service
companies in Latin America from 1990 to 1997. He started his career at Credit Suisse First Boston in New York, where he has worked from 1986 to 1988. Mr. Meaney has a bachelor’s degree in economics from Notre Dame University and a
master’s in Business Administration from Harvard Business School. He also completed the Advanced Management Program at INSEAD.
Maxim Medvedovsky.
For information regarding the business experience, areas of expertise and principal outside business interests of Mr. Medvedovsky, see “—Board of
Directors—Alternate Directors.”
Tarso Rebello Dias.
Mr. Rebello Dias has served as one of our executive
officers since May 2011. Since February 2004, Mr. Rebelo Dias has been treasury director of TNL, where he previously served as manager of financial operations from February 2000 to February 2004. From January 1998 to February 2000, he was
coordinator of financial operations at Globo Comunicações e Participações (GLOBOPAR). From March 1995 to January 1998, Mr. Rebelo Dias was a financial analyst of commodities derivatives at Companhia Vale do Rio Doce
in Rio de Janeiro. He holds a degree in economic sciences from Universidade Federal do Rio de Janeiro and an MBA from Fundação Dom Cabral/Telemar—Brasil.
Fiscal
Council
The Brazilian Corporation Law
requires us to establish a permanent or non-permanent fiscal council
(conselho fiscal).
Our bylaws provide for a permanent fiscal council composed of between three and five members and their respective alternate members. The fiscal council is
a separate corporate body independent of our board of directors, our board of executive officers and our independent accountants. The primary responsibility of the fiscal council is to review our management’s activities and our financial
statements and to report their findings to our shareholders.
The members of our fiscal council are elected by our
shareholders at the annual shareholders’ meeting for one-year terms and are eligible for reelection. The terms of the members of our fiscal council expire at the next annual shareholders’ meeting. Under the Brazilian Corporation Law, the
fiscal council may not contain members who are members of our board of directors or our board of executive officers, spouses or relatives of any member of our board of directors or our board of executive officers, or our employees. To be eligible to
serve on our fiscal council, a person must be a resident of Brazil and either be a university graduate or have been a company officer or fiscal council member of another Brazilian company for at least three years prior to election to our
122
PART FIVE—THE MERGER
fiscal council. Holders of preferred shares without voting rights and non-controlling common shareholders that together hold at least 10.0% of our voting share capital are each entitled to elect
one member and his or her respective alternate to the fiscal council.
The following table sets forth certain information with
respect to the current members of our fiscal council and their alternates:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Position
|
|
Member Since
|
|
Age
|
|
|
Allan Kardec de Melo Ferreira
|
|
Chairman
|
|
February 2009
|
|
|
64
|
|
|
Dênis Kleber Gomide Leite
|
|
Alternate
|
|
February 2009
|
|
|
65
|
|
|
Sidnei Nunes
|
|
Member
|
|
April 2011
|
|
|
51
|
|
|
Aparecido Carlos Correia Galdino
|
|
Alternate
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April 2011
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60
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Éder Carvalho Magalhães
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Member
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February 2009
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43
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Sergio Bernstein
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Alternate
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February 2009
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74
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Marcos Duarte dos Santos (1)
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Member
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April 2010
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41
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Carlos Eduardo Parente de Oliveira Alves (1)
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Alternate
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April 2010
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34
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Leopoldo Henrique Krieger Schneider (2)
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Member
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April 2011
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69
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Eduardo da Gama Godoy (2)
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Alternate
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April 2011
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48
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(1)
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Elected by the common shareholders.
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(2)
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Elected by the preferred shareholders.
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We summarize below the business experience, areas of expertise and principal outside business interests of the current members of our fiscal council and their alternates.
Fiscal Council Members
Allan Kardec de Melo Ferreira.
Mr. Ferreira has served as chairman of our fiscal council since February 2009. He has also served as an alternate member of the fiscal council of TmarPart since
April 2006 and a member of the fiscal council of TNL since April 2002. From 1971 to 1993, he was an in-house counsel with Construtora Andrade Gutierrez. His current activities include management consultancy services to a number of companies in the
civil, commercial and tax areas, participation in corporate restructuring processes (mergers, spin-offs, disposals, sale of assets) of the telecommunications companies of the Andrade Gutierrez Group and in several bidding processes conducted by the
Minas Gerais Roads Department (Departamento de Estrada de Rodagem de Minas Gerais), the Belo Horizonte Traffic Department (Empresa de Transporte e Trânsito de Belo Horizonte), the Ministry of Communications, the National Road Department
(Departamento Nacional de Estradas de Rodagem) and ANATEL. He holds a degree in law from Pontifícia Universidade Católica de Minas Gerais, in addition to having participated in several extension courses in foreign trade, in particular
export services, at Fundação Centro de Comércio Exterior, FDC, Foreign Trade Ministry, and Construtora Andrade Gutierrez.
Sidnei Nunes.
Mr. Nunes has served as a member of our fiscal council since April 2011, has served as an alternate member of the fiscal council of TNL since April 2007, an alternate member of
the fiscal council of TmarPart since April 2008 and an alternate member of the fiscal council of Telemar since April 2007. He served as an alternate member of our fiscal council from February 2009 to April 2011. He has been managing officer of
Jereissati Participações S.A. since April 2008, chief financial officer of La Fonte Telecom S.A. since April 2008 and managing officer of L.F. Tel S.A. since April 2006. Mr. Nunes has served as a member of the boards of directors
of Iguatemi Empresa de Shopping Centers S.A. since April 2006, L.F. Tel S.A. since April 2006, and Grande Moinho Cearense S.A. since April 2005. Mr. Nunes is a financial officer and controller of several companies of the Jereissati Group since
September 1995. Mr. Nunes holds bachelor’s degrees in business administration and accounting from the Faculdade de Administração Paulo Eiró and an MBA from the University of São Paulo.
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PART FIVE—THE MERGER
Éder Carvalho Magalhães.
Mr. Magalhães has served as a member of our fiscal council since February 2009. Since 1995, Mr. Magalhães has been directly responsible for the accounting of all companies of the Grupo Andrade Gutierrez. In January
2002, he also became an officer of the real estate division of Grupo Andrade Gutierrez. He previously served as the controller of Fiat Finanças Brasil Ltda. from 1993 to 1995. Mr. Magalhães began his career as a trainee at
PriceWaterhouse in 1987, and served as audit supervisor from 1992 to 1993. Mr. Magalhães holds a bachelor’s degree in accounting from Instituto Cultural Newton Paiva Ferreira and an MBA from IBMEC.
Leopoldo Henrique Krieger Schneider.
Mr. Schneider has served as a member of our fiscal council since April 2011. He has
worked as a management consultant or advisor in the fields of accounting, finance and tax. To date, he has worked at or advised 143 medium- or large-size companies. Currently, Mr. Schneider is the controller of five companies of the Telenova
Group, where he served from November 2004 to August 2008. He was also the administrative and financial officer of Sport Clube International from January 2000 to January 2001. Mr. Schneider has served as a member of the board of directors of
Kresil S.A. since April 2008. He also served as a member of the board of directors of BSF Engenharia Ltda., from August 2007 to December 2009, and Globalnova Comunicações Ltda., from August 2008 to November 2009. Mr. Schneider
holds a bachelor’s degree in accounting science from Universidade Federal do Rio Grande do Sul.
Marcos Duarte
dos Santos.
Mr. Duarte has served as a member of our fiscal council as a nominee of our preferred shareholders since April 2010. He has served as a member of the fiscal council of Telemar since April 2007. Mr. Duarte was a vice
president and fixed income trader at CSFB—Garantia from 1997 to 1998, a vice
president for Bankers Trust Company in New York from 1996 to 1997, and a vice president for Bankers Trust
Company in Rio de Janeiro from 1994 to 1996. He
served as a member of the fiscal councils of Tele Norte
Celular S.A., Tele Ceará S.A. and Tele Espírito Santo S.A. from 2001 to 2002. He holds a bachelor’s degree in production engineering from the Universidade Federal do
Rio de Janeiro.
Alternate Fiscal Council Members
Denis Kleber Gomide Leite.
Mr. Leitehas served as an alternate member of our fiscal council since February 2009, and he has
served as a member of the fiscal council of TmarPart since April 2006, an alternate member of the fiscal council of TNL since April 2002 and an alternate member of the fiscal council of Telemar since April 2009. Mr. Leite served as a member of
the board on economic matters for the commercial trade association of the State of Minas Gerais (Conselho de v.c. Assuntos Econômicos da Associação Comercial de Minas Gerais) from October 1993 up to December 1998; the
infrastructure board of the National Industry Confederation in Brazil (Conselho de Infraestrutura da CNI—Confederação Nacional da Indústria) from October 1993 up to December 1998; the commission for technical and political
matters of TELEXPO from October 1993 up to December 1998; and the São Paulo Chamber of Telecommunications and Information Technology Chamber (Câmara Paulista de Telecomunicações e Informática) from October 1993 up
to December 1998. He has professional experience in commercial, general, financial and human resources administration, and he has held senior management positions in the following companies: Cia. de Tecnologia da Informação do Estado
de Minas Gerais; Sociedade Mineira de Engenheiros; Fertilizantes Fosfatados—Fosfértil—Grupo Petrobrás Fertilizantes; Federação das Indústrias de Minas Gerais; and Instituto Horizontes e Instituto
Brasileiro para o Desenvolvimento das Telecomunicações. Mr. Leite holds a degree in law from the Universidade Federal de Minas Gerais, a degree in business administration from the União de Negócios e
Administração and a master’s degree in financial administration from the FGV.
Aparecido Carlos Correia
Galdino.
Mr. Galdino has served as an alternate member of our fiscal council since April 2011, and he has served as a member of the fiscal council of TmarPart since April 2008 and an alternate member of the fiscal council of TNL since April
2009. He previously served as a member of our fiscal council from February 2009 to April 2011. He joined the Jereissati Group in 1971 and has been managing officer
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PART FIVE—THE MERGER
and investor relations officer of Jereissati Participações S.A. since April 1990. He has served as the chief financial officer of La Fonte Participações S.A. since
April 1990, and has been a member of the board of directors of L.F. Tel S.A. since February 2008, Iguatemi Empresa de Shopping Centers S.A. since July 2008 and La Fonte Telecom S.A. since April 1991. He has served as a member of the fiscal council
of Contax Participações S.A. since April 2008, as a member of the fiscal council of Tele Norte Celular Participações S.A. from May 2008 to present and as a member of the fiscal council of Amazônia Celular S.A. from
May 2008 to March 2009. Mr. Galdino holds a bachelor’s degree in business administration from Faculdades Integradas Princesa Isabel.
Sérgio Bernstein.
Mr. Bernstein currently serves as an alternate member of our fiscal council. He has also served as a member of the fiscal council of TNL since April 2007 and a member
of the fiscal council of Telemar since April 2008. He has served as an alternate member of the board of directors and vice president of Jereissati Participações S.A. from 1990 to 2007. Mr. Bernstein is a civil engineer and has
extensive experience serving as an officer of Brazilian companies. Mr. Bernstein started his career as a trainee in finance at General Electric S.A. in Brazil in 1961 where he held several managerial positions and was elected vice president of
finance in 1984. Mr. Bernstein holds a bachelor’s degree in civil engineering from the National School of Engineering in Rio de Janeiro.
Eduardo Da Gama Godoy.
Mr. Godoy has served as an alternate member of our fiscal council since April 2011. He has been a partner at HB Audit —Auditores Independentes S/S since January
1994 and an accountant and officer of Godoy Empresarial Serviços Contábeis since November 1993. Mr. Godoy has served as a member of the fiscal council of: Padtec S.A. since August 2007; Ideiasnet S.A. since April 2005; Officer
Distribuidora S.A. since July 2005; and Instituto Cultural Brasileiro Norte Americano since December 2008. He has also been an alternate member of the fiscal council of Weg S.A. since April 2010 and Tegma Gestão Logística S.A. since
April 2011. Mr. Godoy served as a member of the fiscal council of Marisol S.A. from April 2004 to March 2010 and Trafo Componentes Elétricos S.A. from April 2007 to December 2009. Mr. Godoy holds a bachelor’s degree in
accounting science and business administration from Faculdade Porto Alegrense.
Carlos Eduardo Parente de Oliveira
Alves.
Mr. Alves currently serves as an alternate member of our fiscal council as a nominee of our preferred shareholders. He has worked at Polo Capital as an analyst and variable income manager in the electricity, paper and cellulose, oil,
petrochemical and transportations sectors since 2003. Between 2000 and 2003 he worked at Banco UBS as an analyst for the Latin America electricity and sanitation sector. Mr. Alves holds a bachelor’s degree in production engineering from
Pontíficia Universidade Católica do Rio de Janeiro.
Compensa
tion
According to our bylaws, our shareholders are responsible for establishing the aggregate compensation we pay to the members of our board
of directors and our board of executive officers, as well as the individual compensation we pay to members of our fiscal council. Our shareholders determine this compensation at the annual shareholders’ meeting. Once aggregate compensation is
established, our board of directors is responsible for distributing such aggregate compensation individually to the members of our board of directors and our board of executive officers in compliance with our bylaws. Our board of directors does not
have a compensation committee.
The aggregate compensation paid by us to all members of our board of directors, board of
executive officers and our fiscal council for services in all capacities was R$4.6 million in 2010, including share-based remuneration of R$1.9 million. This amount includes pension, retirement or similar benefits for our officers and directors. On
April 27, 2011, our shareholders (acting at the annual shareholders’ meeting) established the following compensation for the year 2011:
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•
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board of directors: an aggregate limit of R$198,800;
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PART FIVE—THE MERGER
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•
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board of executive officers: an aggregate limit of R$1.1 million (excluding amounts paid as benefits, representation allowance or profit sharing); and
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•
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each regular member of our fiscal council: R$2,500 per month, plus travel and lodging expenses (the statutory minimum set forth in the Brazilian
Corporation Law and in our bylaws).
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We compensate our alternate directors for each meeting of our board of
directors that they attend. We compensate alternate members of our fiscal council for each meeting of our fiscal council that they attend.
Our executive officers receive the same benefits generally provided to our employees, such as medical (including dental) assistance, private pension plan and meal vouchers. Like our employees, our
executive officers also receive an annual bonus equal to one-month’s salary (known as the “thirteenth” (monthly) salary in Brazil), an additional one-third of one-month’s salary for vacation, and contributions of 8.0% of their
salary into a defined contribution pension fund known as the Guarantee Fund for Time of Service
(Fundo de Garantia por Tempo de Serviço).
Members of our board of directors and fiscal council are not entitled to these benefits.
Members of our board of directors, board of executive officers and fiscal council are not parties to contracts providing for
benefits upon the termination of employment other than, in the case of executive officers, the benefits described above.
Mate
rial Tax Considerations
The following summary contains a description of the principal Brazilian and U.S. federal income tax consequences of the conversion in the merger of TNL shares or ADSs into Brasil Telecom shares or ADSs,
and of the acquisition, ownership and disposition of Brasil Telecom shares or ADSs. The following summary does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to hold Brasil Telecom
shares or ADSs. This summary is based upon the tax laws of Brazil and the U.S. and regulations under these tax laws as currently in effect, which are subject to change.
Although there is at present no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may culminate in such a treaty. No assurance can
be given, however, as to whether or when a treaty will enter into force or how it will affect holders of Brasil Telecom shares or ADSs.
Prospective holders of TNL shares or ADSs or Brasil Telecom shares or ADSs should consult their own tax advisors as to the tax consequences of the conversion in the merger of TNL shares or ADSs into
Brasil Telecom shares or ADSs, and of the acquisition, ownership and disposition of Brasil Telecom shares or ADSs.
Brazilian Tax
Consider
ations
The following discussion summarizes the principal Brazilian tax consequences
(a) of the exchange of TNL shares or ADSs for Brasil Telecom shares or ADSs, and (b) of the acquisition, ownership and disposition of Brasil Telecom shares or ADSs by a holder that is not resident or domiciled in Brazil for purposes of
Brazilian taxation (a “Non-Brazilian Holder”). It is based on the tax laws of Brazil and regulations thereunder in effect on the date hereof, which are subject to change. This discussion does not specifically address all of the Brazilian
tax considerations that may be applicable to any particular Non-Brazilian Holder. Therefore, each Non-Brazilian Holder should consult its own tax advisor about the Brazilian tax consequences of an investment in Brasil Telecom shares or ADSs.
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PART FIVE—THE MERGER
Merger of TNL into Our Company
As a result of the merger of TNL into our company, Non-Brazilian Holders of TNL shares or ADSs will receive Brasil Telecom shares or ADSs.
The Brazilian tax impacts of this exchange of shares and ADSs are not expressly provided for under Brazilian tax law. We understand that there are arguments to sustain that no taxation is due upon the exchange of TNL shares or ADSs for Brasil
Telecom shares or ADSs. This conclusion is based on our understanding that the exchange of shares or ADSs does not represent a disposition of shares or ADSs which gives rise to a taxable capital gain in Brazil, and that the exchange of shares or
ADSs does not give rise to any income which is legally or economically available to the Non-Brazilian Holder. With respect to ADSs in particular, this conclusion is also based on our understanding that the ADSs should not be regarded as assets
located in Brazil. See “—Taxation of Gains.”
There is a risk that Brazilian tax authorities adopt a different
understanding and consider the exchange of TNL shares or ADSs for Brasil Telecom shares or ADSs as an event giving rise to a taxable gain in Brazil. In this case, the withholding income tax would be imposed on the gain, according to the rules
described under “—Taxation of Gains.” Interest and penalties could also be imposed.
Dividends
Dividends paid by a Brazilian corporation, such as our company, including stock dividends and other dividends paid to a Non-Brazilian
Holder of Brasil Telecom shares or ADSs, are currently not subject to withholding income tax in Brazil to the extent that such amounts are related to profits generated after January 1, 1996. Dividends paid from profits generated before
January 1, 1996 may be subject to Brazilian withholding income tax at varying rates, according to the tax legislation applicable to each corresponding year.
Interest on Shareholders’ Equity
Law No. 9,249, dated
December 26, 1995, as amended, allows a Brazilian corporation, such as our company, to make distributions to shareholders of interest on shareholders’ equity, and treat those payments as a deductible expense for purposes of calculating
Brazilian corporate income tax, and, since 1998, social contribution on net profits as well, as long as the limits described below are observed. These distributions may be paid in cash. For tax purposes, the deductible amount of this interest is
limited to the daily pro rata variation of the Brazilian long-term interest rate, as determined by the Brazilian Central Bank from time to time, and the amount of the deduction may not exceed the greater of:
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50% of net income (after the deduction of social contribution on net profits but before taking into account the provision for corporate income tax and
the amounts attributable to shareholders as interest on shareholders’ equity) for the period in respect of which the payment is made; and
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•
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50% of the sum of retained profits and profit reserves as of the date of the beginning of the period in respect of which the payment is made.
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Payment of interest on shareholders’ equity to a Non-Brazilian Holder is subject to withholding income
tax at the rate of 15%, or 25% if the Non-Brazilian Holder is domiciled in a country or location that is considered to be a “tax haven” jurisdiction for this purpose. For this purpose, the definition of “tax haven” encompasses
countries and locations (a) that do not impose income tax, (b) that impose income tax at a maximum rate of 20% or less, or (c) the laws of which do not allow access to shareholding composition, ownership of investments, or the
identity of the ultimate beneficiary of earnings that are attributed to non-residents (a “Tax Favorable Jurisdiction”). See “—Discussion on the Definition of Tax Haven Jurisdictions.”
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PART FIVE—THE MERGER
These payments of interest on shareholders’ equity may
be included, at their net value, as part of any mandatory dividend. To the extent payment of interest on net equity is so included, we are required to distribute to shareholders an additional amount to ensure that the net amount received by them,
after payment of the applicable withholding income tax, is at least equal to the mandatory dividend.
Payments of interest on
shareholders’ equity are decided by our shareholders, at our annual shareholders meeting, on the basis of recommendations of our board of directors. No assurance can be given that our board of directors will not recommend that future
distributions of profits should be made by means of interest on shareholders’ equity instead of by means of dividends.
Distributions of interest on shareholder’s equity to Non-Brazilian Holders may be converted into U.S. dollars and remitted outside
Brazil, subject to applicable exchange controls, to the extent that the investment is registered with the Central Bank of Brazil. See “Part Six—Shareholder Rights—Exchange Controls.”
Taxation of Gains
Under Law No. 10,833, enacted on December 29, 2003, the gain on the disposition or sale of assets located in Brazil by a
Non-Brazilian Holder, whether to another non-Brazilian resident or to a Brazilian resident, may be subject to the withholding of income tax in Brazil.
With respect to the disposition of the shares of Brasil Telecom, as they are assets located in Brazil, the Non-Brazilian Holder should be subject to income tax on the gains realized, following the rules
described below, regardless of whether the transactions are conducted in Brazil or with a Brazilian resident.
With respect to
the ADSs, although the matter is not entirely clear, arguably the gains realized by a Non-Brazilian Holder on the disposition of ADSs are not taxed in Brazil, on the basis that ADSs are not “assets located in Brazil” for the purposes of
Law No. 10,833. We cannot assure you, however, that the Brazilian tax authorities or the Brazilian courts will agree with this interpretation. As a result, gains on a disposition of ADSs by a Non-Brazilian Holder to a Brazilian resident, or
even to a non-Brazilian resident, in the event that courts determine that ADSs would constitute assets located in Brazil, may be subject to income tax in Brazil according to the rules applicable to the shares of Brasil Telecom, described above.
As a general rule, gains realized as a result of a disposition of shares of Brasil Telecom are equal to the positive
difference between the amount realized on the transaction and its acquisition cost.
Under Brazilian law, however, income tax
rules on such gains can vary depending on the domicile of the Non-Brazilian Holder, the type of registration of the investment by the Non-Brazilian Holder with the Central Bank and how the disposition is carried out, as described below.
Gains realized on a disposition of shares carried out on the Brazilian stock exchange (which includes the organized over-the-counter
market) are:
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exempt from income tax when realized by a Non-Brazilian Holder that (1) has registered its investment in Brazil with the Central Bank under the
rules of Resolution 2,689 (a “2,689 Holder”), and (2) is not domiciled or a resident in a country or location which does not tax income, or that taxes income at a maximum rate of 20% or less (“Low or Nil Tax Jurisdiction”).
See “—Discussion on the Definition of Tax Haven Jurisdictions” below for a discussion on the possibility of the concept of Low or Nil Tax Jurisdiction being expanded by Law No. 11,727; or
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subject to income tax at a rate of up to 25% in any other case, including a case of gains realized by a Non-Brazilian Holder that is not a 2,689 Holder
or a Non-Brazilian Holder that is domiciled or a
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PART FIVE—THE MERGER
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resident in a Low or Nil Tax Jurisdiction. In these cases, a withholding income tax of 0.005% of the sale value will be applicable and can be later offset with the eventual income tax due on the
capital gain.
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Any gains realized on a disposition of shares of Brasil Telecom that is not carried out on a
Brazilian stock exchange are subject to income tax at the rate of 15%, or up to 25% in the case of a Non-Brazilian Holder that is domiciled or resident in a Low or Nil Tax Jurisdiction or in a Tax Favorable Jurisdiction. See “Discussion on the
Definition of Tax Haven Jurisdictions.” In the event that these gains are related to transactions conducted on the Brazilian non-organized over-the-counter market with intermediation, the withholding income tax of 0.005% shall also be
applicable and can be offset with the eventual income tax due on the capital gain.
In the case of 2,689 Holders, a country or
location should only be defined as a “tax haven” jurisdiction when it (a) does not tax income, or (b) taxes income at a maximum rate of 20% or less. In the case of gains realized by Non-Brazilian Holders other than 2,689 Holders,
a country or location should be defined as a “tax haven” jurisdiction when it (a) does not tax income, (b) taxes income at a maximum rate of 20% or less or (c) imposes restrictions on the disclosure of shareholding
composition, of the ownership of investments, or of the identity of the ultimate beneficiary of earnings that are attributed to non-residents.
In the case of a redemption of shares (or ADSs, in the event they are deemed to be “assets located in Brazil”) or a capital reduction by a Brazilian corporation, such as our company, the
positive difference between the amount effectively received by the Non-Brazilian Holder and the corresponding acquisition cost of the respective shares (or ADSs, in the event they are deemed to be “assets located in Brazil”) is treated,
for tax purposes, as capital gain derived from sale or exchange of shares not carried out on a Brazilian stock exchange market, and is therefore subject to income tax at the rate of 15% or 25%, as the case may be.
The deposit of common or preferred shares of Brasil Telecom in exchange for Brasil Telecom ADSs may be subject to Brazilian income tax if
the acquisition cost of the shares is lower than (a) the average price per share on a Brazilian stock exchange on which the greatest number of such shares were sold on the day of deposit; or (b) if no shares were sold on that day, the
average price on the Brazilian stock exchange on which the greatest number of shares were sold in the 15 trading sessions immediately preceding such deposit. In such case, the difference between the acquisition cost and the average price of the
shares calculated as above will be considered to be a capital gain subject to withholding income tax at the rate of 15% or 25%, as the case may be. In some circumstances, there may be arguments to claim that this taxation is not applicable in the
case of a Non-Brazilian Holder that is a 2,689 Holder and that is not domiciled or resident in a Low or Nil Tax Jurisdiction. See “Discussion on the Definition of Tax Haven Jurisdictions.”
Any exercise of preemptive rights relating to Brasil Telecom shares or ADSs will not be subject to Brazilian taxation. Any gain on the
sale or assignment of preemptive rights relating to shares of Brasil Telecom, including the sale or assignment carried out by the Brasil Telecom Depositary, on behalf of Non-Brazilian Holders of ADSs, will be subject to Brazilian income taxation
according to the same rules applicable to the sale or disposition of shares of Brasil Telecom.
As a Non-Brazilian Holder of
ADSs, you may cancel your ADSs and exchange them for preferred shares. Income tax will not be levied on such exchange, as long as the appropriate rules are complied with in connection with the registration of the investment with the Central Bank,
and as long as ADSs are not deemed to be “assets located in Brazil.”
Discussion on the Definition of Tax Haven Jurisdictions
On June 24, 2008, Law 11,727 was enacted, with effect as of January 1, 2009, establishing the concept of a
“privileged tax regime.” Under this new law, a “privileged tax regime” is considered to apply to a jurisdiction
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PART FIVE—THE MERGER
that meets any of the following requirements: (1) it does not tax income or taxes income at a maximum rate of 20% or less; (2) it grants tax advantages to a non-resident entity or
individual (a) without requiring substantial economic activity in the jurisdiction of such non-resident entity or individual or (b) to the extent such non-resident entity or individual does not conduct substantial economic activity in the
jurisdiction of such non-resident entity or individual; (3) it does not tax income generated abroad, or imposes tax on income generated abroad at a maximum rate of 20% or less; or (4) restricts the ownership disclosure of assets and
ownership rights or restricts disclosure about the execution of economic transactions.
The interpretation of the current
Brazilian tax legislation should lead to the conclusion that the above-mentioned concept of “privileged tax regime” should apply only for specific Brazilian tax purposes, including for purposes of Brazilian transfer pricing rules and
Brazilian thin capitalization rules. According to this interpretation, the concept of “privileged tax regime” should not be applied in connection with the taxation of dividends, interest on shareholders’ equity and gains related to
investments made by Non-Brazilian Holders in Brazilian companies, such as Brasil Telecom. Recent regulations and non-binding tax rulings issued by Brazilian federal tax authorities seem to confirm this interpretation.
Tax on Foreign Exchange Transactions
Brazilian law imposes a Tax on Foreign Exchange Transactions (“IOF/Exchange Tax”) on the conversion of
reais
into foreign currency and on the conversion of foreign currency into reais.
The currently applicable rate for most types of foreign exchange transactions is 0.38%. However, other rates apply to specific types of transactions.
In particular, foreign exchange transactions related to inflows of funds to Brazil for investments made by foreign investors on the Brazilian financial and capital markets are generally subject to
IOF/Exchange Tax at a rate of 6%. In certain circumstances, foreign exchange transactions connected to those types of investments are subject to the IOF/Exchange Tax at a 2% rate, including foreign exchange transactions related to: (1) an
inflow of funds for floating rate investments (such as preferred shares) made on a Brazilian stock or future and commodities exchange by 2,689 Holders, provided that such transactions do not involve derivatives and do not result in pre-determined
income; (2) an inflow of funds for the acquisition of shares of Brazilian companies in either (a) a public offer of shares that is registered with the CVM, or (b) a subscription of shares, provided that, in both circumstances, the
Brazilian company issuing the shares is entitled to trade its shares on a Brazilian stock exchange; (3) the fictional inflow of funds resulting from the execution of a Symbolic FX Contract (as defined below) in connection with the cancellation
of ADSs and exchange for shares traded on a Brazilian stock exchange; and (4) the fictional inflow of funds resulting from the execution of a Symbolic FX Contract in connection with resulting from the change of the type of registration of the
foreign investment from a “foreign direct investment” to an investment registered under the rules of National Monetary Council Resolution No. 2,689.
Foreign exchange transactions related to outflows of funds in connection with investments carried out on the Brazilian financial and capital markets are subject to the IOF/Exchange Tax at a rate of zero
percent. The IOF/Exchange Tax also levies at a zero percent rate in case of dividends and interest on shareholders’ equity paid by a Brazilian corporation, such as our company, to Non-Brazilian Holders.
The Brazilian government is permitted to increase the rate of the IOF/Exchange Tax at any time by up to 25% on the foreign exchange
transaction amount. However, any increase in rates will only apply to transactions carried out after this increase in rates enters into force.
Tax on Transactions Involving Bonds and Securities
Brazilian law also imposes a Tax on Transactions Involving Bonds and Securities (“IOF/Securities Tax”) due on transactions involving bonds and securities, including those carried out on a
Brazilian stock exchange.
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PART FIVE—THE MERGER
The rate of IOF/Securities Tax applicable to most transactions involving shares and ADSs is currently zero, although the Brazilian government may increase such rate at any time up to 1.5% of the
transaction amount per day, but only in respect of future transactions. In particular, the transfer (
cessão
) of shares traded on a Brazilian stock exchange for the issuance of depositary receipts to be traded outside Brazil is
currently subject to the IOF/Securities Tax at the rate of 1.5%, calculated based on the product of (a) the number of shares transferred, multiplied by (b) the closing price for such shares on the date prior to the date of the transfer.
Other Brazilian Taxes
There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of Brasil Telecom shares or ADSs by a Non-Brazilian Holder except for gift and inheritance
taxes levied by some states in Brazil. There are no Brazilian stamp, issue, registration, or similar taxes or duties payable by Non-Brazilian Holders of Brasil Telecom shares or ADSs.
U.S. Federal Income Tax Co
nsiderations
The
following discussion represents the opinion of White & Case LLP regarding the material U.S. federal income tax consequences, subject to the limitations set forth herein, to U.S. Holders (as defined below) of (1) the merger, and
(2) the ownership of common shares, preferred shares and/or ADSs of Brasil Telecom (the “Brasil Telecom Shares or ADSs”) received in the merger. In rendering its opinion, White & Case LLP is relying upon representations that
Brasil Telecom has made to it regarding certain factual matters. If any of such representations are incorrect, then the conclusions expressed herein may be adversely affected. White & Case LLP is rendering no opinion regarding the
qualification of TNL or Brasil Telecom as a PFIC for any period. This discussion only applies to U.S. Holders that hold common shares, preferred shares or ADSs of TNL or, following the merger, common shares, preferred shares or ADSs of Brasil
Telecom as capital assets. This discussion does not describe all of the tax consequences that may be relevant to a holder in light of the holder’s particular circumstances or to holders subject to special rules, such as:
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certain financial institutions;
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dealers and certain traders in securities;
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persons holding shares or ADSs of TNL as part of a hedge, straddle, integrated transaction, or similar transaction;
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persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
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partnerships or other entities classified as partnerships for U.S. federal income tax purposes;
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persons subject to the alternative minimum tax;
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tax-exempt organizations;
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persons that own or have owned, directly or by attribution, 5% or more, by voting power or value, of the outstanding equity interests of TNL (or,
following the completion of the merger, U.S. Holders that will own, directly or by attribution, 5% or more, by voting power or value, of the outstanding equity interests of Brasil Telecom);
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persons who acquired shares or ADSs of TNL pursuant to the exercise of any employee stock option or otherwise as compensation; or
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certain former citizens or long-term residents of the United States.
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This description does not address any state, local or
non-U.S. tax consequences of the merger or the ownership of common shares, preferred shares or ADSs of Brasil Telecom received in the merger by U.S. Holders. Moreover, this description does not address the consequences of any U.S. federal tax other
than income tax, including but not limited to the U.S. federal estate and gift taxes. This description is based on the Internal Revenue Code of 1986, as amended, existing and temporary U.S. Treasury Regulations and judicial and administrative
interpretations thereof, in each case as in effect and available on the date hereof, as well as proposed Treasury Regulations available on the date hereof. All of the foregoing is subject to change, which change could apply retroactively and could
affect the tax consequences described below. Holders of common shares or preferred shares or ADSs of TNL should consult their tax advisers to determine the particular tax consequences to such holders of the merger or the ownership of common shares,
preferred shares or ADSs of Brasil Telecom received in the merger by U.S. Holders, including the applicability and effect of U.S. state, local and non-U.S. tax laws.
As used herein, the term “U.S. Holder” means, for U.S. federal tax purposes, a beneficial owner of common shares, preferred shares or ADSs of TNL (or following the merger, common shares,
preferred shares or ADSs of Brasil Telecom) that is:
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an individual citizen or resident of the United States;
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a corporation organized under the laws of the United States, any state thereof or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust if (a) a court within the United States is able to exercise primary supervision over its administration and (b) one or more United
States persons have the authority to control all of the substantial decisions of such trust.
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partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds common shares, preferred shares or ADSs of TNL (or following the merger, common shares, preferred shares or ADSs of Brasil Telecom), the tax
treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. A partnership or its partners should consult their tax advisor as to its tax consequences.
Treatment of ADSs
In general, for U.S. federal income tax purposes, a holder of an ADR evidencing an ADS will be treated as the beneficial owner of the
common shares or preferred shares of TNL (or following the merger, if applicable, the Brasil Telecom common shares or preferred shares) represented by the applicable ADS.
Treatment of the Merger
The merger of TNL with and into Brasil
Telecom should be treated as a tax-free reorganization for U.S. federal income tax purposes within the meaning of Section 368(a) of the Code. Brasil Telecom does not intend to request a ruling from the Internal Revenue Service (the
“IRS”) regarding any of the U.S. federal income tax consequences of the merger, and the characterization of the merger set forth in this discussion will not be binding on the IRS or the U.S. courts. Therefore, no assurance can be provided
that the conclusions ultimately reached in this discussion will not be challenged by the IRS or will be sustained by a U.S. court if so challenged.
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PART FIVE—THE MERGER
Tax Consequences to U.S. Holders if the Merger Qualifies as a Tax-Free
Reorganization
If the merger qualifies as a tax-free reorganization for U.S. federal income tax purposes, then, subject to
the PFIC rules discussed below, the merger generally would result in the following U.S. federal income tax consequences to U.S. Holders of shares or ADSs of TNL:
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no gain or loss would be recognized by a U.S. Holder of shares or ADSs as a result of the surrender of shares in exchange for common shares, preferred
shares or ADSs of Brasil Telecom pursuant to the merger;
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the aggregate tax basis of the common shares, preferred shares or ADSs of Brasil Telecom received in the merger will be the same as the aggregate tax
basis of the shares or ADSs surrendered in exchange for the common shares, preferred shares or ADSs of Brasil Telecom; and
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the holding period of the common shares, preferred shares or ADSs of Brasil Telecom received by a U.S. Holder will include the holding period of the
shares or ADSs surrendered in exchange therefor.
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This discussion does not discuss the U.S. federal income
tax consequences of the merger for U.S. Holders that own 5% or more of the shares or ADSs of TNL or will own 5% or more of the common shares, preferred shares or ADSs of Brasil Telecom after consummation of the merger. Each such U.S. Holder should
consult its own tax advisor regarding the U.S. federal income tax consequences of the merger, including but not limited to whether it has information reporting and record retention responsibilities in connection with the merger, and whether it
should enter into a five-year gain recognition agreement under Section 367(a) of the Code with respect to the merger.
Foreign
Currency Gain or Loss
For purposes of calculating gain or loss pursuant to the merger, a cash basis taxpayer that paid
Brazilian
reais
for a share of TNL generally will determine its tax basis in the share by translating the Brazilian
reais
it paid into U.S. dollars using the exchange rate in effect on the settlement date of the taxpayer’s
purchase. A cash basis taxpayer that receives Brazilian
reais
with respect to fractional common shares, preferred shares or ADSs of Brasil Telecom will, for U.S. federal income tax purposes, determine the taxpayer’s amount of cash
received using the U.S. dollar value of the Brazilian
reais
received. This U.S. dollar value is computed by reference to the exchange rate in effect on the date the Brazilian
reais
are received by the taxpayer, or in the case of
payments received in respect of ADSs, on the date such payments are received by the depository, regardless of whether the Brazilian
reais
are converted into U.S. dollars. If the Brazilian
reais
received pursuant to the merger are not
converted into U.S. dollars on the date of receipt, a cash basis taxpayer will have a basis in the Brazilian
reais
equal to their U.S. dollar value computed as described above, and any gain or loss realized on a subsequent conversion or other
disposition of the Brazilian
reais
will generally be treated as ordinary income or loss. An accrual basis taxpayer may elect to apply the above rules that are applicable to a cash basis taxpayer.
Passive Foreign Investment Company Rules
A U.S. Holder may have different consequences if TNL is or was a PFIC for U.S. federal income tax purposes for any taxable year during which the U.S. Holder held the shares or ADSs of TNL. In general, a
non-U.S. corporation is considered a PFIC for any taxable year in which (1) 75 percent or more of its gross income consists of passive income (such as dividends, interest, rents and royalties), or (2) 50 percent or more of the average
value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes of the PFIC asset test, the aggregate fair market value of the assets of a publicly traded foreign corporation generally is treated
as being equal to the sum of the aggregate value of the outstanding stock and the total amount of the liabilities of such corporation (the “Market Capitalization”). In addition, a non-U.S. corporation that directly or indirectly owns at
least 25 percent by value of the stock of another corporation is
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PART FIVE—THE MERGER
treated as if it held its proportionate share of the assets of such other corporation and received directly its proportionate share of the income of such other corporation. If a non-U.S.
corporation is a PFIC for any year during which a U.S. Holder holds its shares or ADSs, it will generally continue to be treated as a PFIC with respect to such holder for all succeeding years during which the U.S. Holder holds its shares or ADSs
even if the non-U.S. corporation’s assets and income cease to meet the threshold requirements for PFIC status.
If TNL
were characterized as a PFIC for any taxable year during which a U.S. Holder held shares or ADSs of TNL, the U.S. Holder generally would be subject to special U.S. federal income tax rules. In general, (1) a U.S. Holder would be required to
recognize gain as a result of the merger as if it were a taxable transaction, regardless of whether the merger qualified as a tax-free reorganization (unless Brasil Telecom also were a PFIC for the taxable year which includes the day after the
effective date of the merger), and (2) gain recognized by a U.S. Holder that exchanges its shares or ADSs pursuant to the merger would be allocated ratably over the holder’s holding period for the shares or ADSs. The amounts allocated to
the current taxable year and to any year before TNL became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for that taxable year for individuals or
corporations, as appropriate, and an interest charge would be imposed on the tax attributable to such allocated amounts.
Ownership and
Disposition of Common Shares, Preferred Shares or ADSs
of
Brasil Telecom
Taxation of Dividends
Subject to the discussion below under “—Passive Foreign Investment Company Rules,” in general, the gross amount of a
distribution made with respect to a common share, preferred share or ADS of Brasil Telecom (which for this purpose shall include distributions of interest attributable to shareholders’ equity before any reduction for any Brazilian taxes
withheld therefrom) will, to the extent made from the current or accumulated earnings and profits of Brasil Telecom, as determined under U.S. federal income tax principles, constitute a dividend to a U.S. Holder for U.S. federal income tax purposes.
For taxable years beginning on or before December 31, 2012, non-corporate U.S. Holders may be taxed on dividends from a qualified foreign corporation at the lower rates applicable to long-term capital gains (
i.e.,
gains with respect to
capital assets held for more than one year). A foreign corporation is treated as a qualified foreign corporation with respect to dividends received from that corporation on shares or ADSs that are readily tradable on an established securities market
in the United States. U.S. Treasury Department guidance indicates that the ADSs (which are currently listed on the NYSE and which Brasil Telecom expects will continue to be listed on the NYSE), but not the common shares or preferred shares of Brasil
Telecom, are readily tradable on an established securities market in the United States. Thus, subject to the discussion below under “—Passive Foreign Investment Company Rules,” dividends that Brasil Telecom pays on the ADS, but not on
common shares or preferred shares, currently meet the conditions required for these reduced tax rates. However, there can be no assurance that the ADSs will be considered readily tradable on an established securities market in later years.
Furthermore, a U.S. holder’s eligibility for such preferential rate is subject to certain holding period requirements and the non-existence of certain risk reduction transactions with respect to the ADSs. Such dividends will not be eligible for
the dividends received deduction generally allowed to corporate U.S. Holders. Subject to the discussion below under “—Passive Foreign Investment Company Rules,” if a distribution exceeds the amount of the current and accumulated
earnings and profits of Brasil Telecom, it will be treated as a non-taxable return of capital to the extent of the U.S. Holder’s tax basis in the common share, preferred share or ADS of Brasil Telecom on which it is paid and thereafter as
capital gain. Brasil Telecom does not maintain calculations of the earnings and profits of Brasil Telecom under U.S. federal income tax principles. Therefore, U.S. Holders should expect that distributions by Brasil Telecom generally will be treated
as dividends for U.S. federal income tax purposes.
A dividend paid in
reais
will be includible in the income of a U.S.
Holder at its value in U.S. dollars calculated by reference to the prevailing spot market exchange rate in effect on the day it is received by the U.S. Holder in the case of the common shares or preferred shares or, in the case of a dividend
received in respect of
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PART FIVE—THE MERGER
ADSs, on the date the dividend is received by the depositary, whether or not the dividend is converted into U.S. dollars. Assuming the payment is not converted at that time, the U.S. Holder will
have a tax basis in
reais
equal to that U.S. dollar amount, which will be used to measure gain or loss from subsequent changes in exchange rates. Any gain or loss realized by a U.S. Holder that subsequently sells or otherwise disposes of
reais
, which gain or loss is attributable to currency fluctuations after the date of receipt of the dividend, will be ordinary gain or loss. The amount of any distribution of property other than cash will be the fair market value of such
property on the date of distribution.
The gross amount of any dividend paid (which will include any amounts withheld in
respect of Brazilian taxes) with respect to any common share, preferred share or ADS of Brasil Telecom will be subject to U.S. federal income taxation as foreign source dividend income, which may be relevant in calculating a U.S. Holder’s
foreign tax credit limitation. Subject to limitations under U.S. federal income tax law concerning credits or deductions for foreign taxes and certain exceptions for short-term and hedged positions, any Brazilian withholding tax will be treated as a
foreign income tax eligible for credit against a U.S. holder’s U.S. federal income tax liability (or at a U.S. Holder’s election, may be deducted in computing taxable income if the U.S. Holder has elected to deduct all foreign income taxes
for the taxable year). The limitation on foreign taxes eligible for the U.S. foreign tax credit is calculated separately with respect to specific “baskets” of income. For this purpose, the dividends should generally constitute
“passive category income,” or in the case of certain U.S. Holders, “general category income.” The rules with respect to foreign tax credits are complex, and U.S. Holders are urged to consult their own tax advisors regarding the
availability of the foreign tax credit under their particular circumstances.
Section 305 of the Code provides special
rules for the tax treatment of preferred stock. According to the U.S. Treasury Regulations under that section, the term preferred stock generally refers to stock which enjoys certain limited rights and privileges (generally associated with specified
dividend and liquidation priorities) but does not participate in corporate growth to any significant extent. While the preferred shares of Brasil Telecom have some preferences over the common shares of Brasil Telecom, the preferred shares are not
fixed as to dividend payments or liquidation value. Consequently, although the matter is not entirely clear because the determination is highly factual in nature, it is more likely than not that the preferred shares of Brasil Telecom will be treated
as “common stock” within the meaning of Section 305 of the Code. If the preferred shares of Brasil Telecom are treated as “common stock” for purposes of Section 305 of the Code, distributions to U.S. Holders of
additional shares of such “common stock” or preemptive rights relating to such “common stock” with respect to their preferred shares or ADSs of Brasil Telecom that are made as part of a pro rata distribution to all shareholders
in most instances will not be subject to U.S. federal income tax. On the other hand, if the preferred shares of Brasil Telecom are treated as “preferred stock” within the meaning of Section 305 of the Code, and if a U.S. Holder
receives a distribution of additional shares or preemptive rights as described in the preceding sentence, such distributions (including amounts withheld in respect of any Brazilian taxes) will be treated as dividends to the same extent and in the
same manner as distributions payable in cash. In that event, the amount of such distribution (and the basis of the new shares or preemptive rights so received) will equal the fair market value of the shares or preemptive rights on the date of
distribution.
Sale, Exchange or Other Disposition of Common Shares, Preferred Shares or ADSs of Brasil Telecom
A deposit or withdrawal of common shares or preferred shares by a U.S. Holder in exchange for the ADS that represent such shares will not
result in the realization of gain or loss for U.S. federal income tax purposes. A U.S. Holder generally will recognize capital gain or loss upon a sale, exchange or other disposition of a common share, preferred share or ADS of Brasil Telecom held
by the U.S. Holder or the depositary, as the case may be, in an amount equal to the difference between the U.S. Holder’s adjusted basis in its common shares, preferred shares or ADSs of Brasil Telecom (determined in U.S. dollars) and the U.S.
dollar amount realized on the sale, exchange or other disposition. If a Brazilian tax is withheld on the sale, exchange or other disposition of a share,
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PART FIVE—THE MERGER
the amount realized by a U.S. Holder will include the gross amount of the proceeds of that sale, exchange or other disposition before deduction of the Brazilian tax. In the case of a
non-corporate U.S. Holder, the maximum marginal U.S. federal income tax rate applicable to capital gain generally will be lower than the maximum marginal U.S. federal income tax rate applicable to ordinary income (other than, as discussed above,
certain dividends) if such holder’s holding period for such common share, preferred share or ADS of Brasil Telecom exceeds one year (i.e., such gain is a long-term capital gain). Capital gain, if any, realized by a U.S. Holder on the sale or
exchange of a common share, preferred share or ADS of Brasil Telecom generally will be treated as U.S. source income for U.S. foreign tax credit purposes. Consequently, in the case of a disposition or deposit of a common share, preferred share or
ADS of Brasil Telecom that is subject to Brazilian tax, the U.S. Holder may not be able to use the foreign tax credit for that Brazilian tax unless it can apply the credit against U.S. tax payable on other income from foreign sources in the
appropriate income category, or, alternatively, it may take a deduction for the Brazilian tax if it elects to deduct all of its foreign income taxes. The deductibility of capital losses is subject to limitations under the Code.
As discussed above, if the merger qualifies as a tax-free reorganization and TNL is not a PFIC, the aggregate tax basis of the common
shares, preferred shares or ADSs of Brasil Telecom received in the merger will be the same as the aggregate tax basis of the shares or ADSs surrendered in exchange for the common shares, preferred shares or ADSs of Brasil Telecom (see
“—Treatment of the Merger—Tax Consequences to U.S. Holders if the Merger Qualifies as a Tax-Free Reorganization”).
With respect to the sale or exchange of common shares, preferred shares or ADSs of Brasil Telecom, the amount realized generally will be the U.S. dollar value of the payment received determined on
(1) the date of receipt of payment in the case of a cash basis U.S. Holder, and (2) the date of disposition in the case of an accrual basis U.S. Holder. If the common shares, preferred shares or ADSs of Brasil Telecom are treated as traded
on an “established securities market,” a cash basis taxpayer, or, if it elects, an accrual basis taxpayer, will determine the U.S. dollar value of the amount realized by translating the amount received at the spot rate of exchange on the
settlement date of the sale.
Other Brazilian Taxes
Any Brazilian IOF/Exchange Tax or IOF/Bonds and Securities Tax (as discussed under “—Brazilian Tax Considerations” above) may not be treated as a creditable foreign tax for U.S. federal
income tax purposes, although a U.S. Holder may be entitled to deduct such taxes if it elects to deduct all of its foreign income taxes. U.S. Holders should consult their tax advisors regarding the U.S. federal income tax consequences of these
taxes.
Passive Foreign Investment Company Rules
Based on certain estimates of the gross income and gross assets of Brasil Telecom, the nature of its business, the size of its investment in certain subsidiaries, and its anticipated Market
Capitalization, Brasil Telecom believes that it will not be classified as a PFIC for the taxable year ended December 31, 2011. Determining PFIC classification is fundamentally factual in nature, and such determination generally cannot be made
until well after the close of the taxable year in question. Consequently, there can be no assurance that Brasil Telecom will not be a PFIC for the taxable year ending December 31, 2011 or any future taxable year. Moreover, Brasil Telecom has
not obtained an opinion from counsel regarding the PFIC status of Brasil Telecom for any taxable period.
Brasil
Telecom’s status in future years will depend on its assets and activities in those years. Brasil Telecom has no reason to believe that its assets or activities will change in a manner that would cause it to be classified as a PFIC for the
taxable year ending December 31, 2011 or any future year, but there can be no assurance that Brasil Telecom will not be considered a PFIC for any taxable year because its status will depend on its assets and activities in those years, as well as its
actual Market Capitalization as determined at the end of each calendar quarter. If Brasil Telecom is or becomes a PFIC (except as discussed below), any excess distribution (generally a distribution in excess of 125% of the average distribution over
a three-year period or shorter holding period for
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PART FIVE—THE MERGER
Brasil Telecom shares) and realized gain will be treated as ordinary income and will be subject to tax as if (1) the excess distribution or gain had been realized ratably over the U.S.
holder’s holding period, (2) the amount deemed realized in each year had been subject to tax in each such year at the highest marginal rate for such year (other than income allocated to the current period or any taxable period before
Brasil Telecom became a PFIC, which would be subject to tax at the U.S. Holder’s regular ordinary income rate for the current year and would not be subject to the interest charge discussed below), and (3) the interest charge generally
applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those years. U.S. Holders should consult their own tax advisors regarding the tax consequences that would arise if Brasil Telecom were treated as a PFIC.
If Brasil Telecom were a PFIC, a U.S. holder of common shares, preferred shares or ADSs of Brasil Telecom may be able to make
certain elections that may alleviate certain of the tax consequences referred to above. Where a company that is a PFIC meets certain reporting requirements, a U.S. Holder can avoid certain adverse PFIC consequences described above by making a
“qualified electing fund,” or QEF, election to be taxed currently on its proportionate share of the PFIC’s ordinary income and net capital gains. However, Brasil Telecom does not intend to comply with the necessary accounting and
record keeping requirements that would allow a U.S. Holder to make a QEF election with respect to Brasil Telecom.
If the
common shares, preferred shares or ADSs of Brasil Telecom are “regularly traded” on a “qualified exchange,” a U.S. Holder may make a mark-to-market election with respect to such common shares, preferred shares or ADSs of Brasil
Telecom, as the case may be. If a U.S. Holder makes the mark-to-market election, for each year in which Brasil Telecom is a PFIC, the holder will generally include as ordinary income the excess, if any, of the fair market value of the common shares,
preferred shares or ADSs of Brasil Telecom, as the case may be, at the end of the taxable year over their adjusted tax basis, and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted tax basis of the common shares,
preferred shares or ADSs of Brasil Telecom, over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). If a U.S. Holder makes the
election, the holder’s tax basis in the common shares, preferred shares or ADSs of Brasil Telecom, as the case may be, will be adjusted to reflect the amount of any such income or loss. Any gain recognized on the sale or other disposition of
common shares, preferred shares or ADSs of Brasil Telecom will be treated as ordinary income. The common shares, preferred shares or ADSs of Brasil Telecom will be considered “marketable stock” if they are traded on a qualified exchange,
other than in
de minimis
quantities, on at least 15 days during each calendar quarter. The NYSE is a qualified exchange and the BM&FBOVESPA may constitute a qualified exchange for this purpose provided the BM&FBOVESPA meets certain
trading volume, listing, financial disclosure, surveillance and other requirements set forth in applicable U.S. Treasury Regulations. However, Brasil Telecom cannot be certain that the common shares, preferred shares or ADSs of Brasil Telecom will
continue to trade on the BM&FBOVESPA or the NYSE, respectively, or that the common shares, preferred shares or ADSs of Brasil Telecom will be traded on at least 15 days in each calendar quarter in other than
de minimis
quantities. U.S.
Holders should be aware, however, that if Brasil Telecom were determined to be a PFIC, the interest charge regime described above could be applied to indirect distributions or gains deemed to be attributable to U.S. Holders in respect of any of its
subsidiaries that also may be determined to be a PFIC, and the mark-to-market election generally would not be effective for such subsidiaries. Each U.S. Holder should consult its own tax advisor to determine whether a mark-to-market election is
available and the consequences of making an election if Brasil Telecom were characterized as a PFIC.
Legislation enacted in
2010 creates an additional annual filing requirement (the “Reporting Legislation”) for U.S. persons who are shareholders of a PFIC. The Reporting Legislation does not describe what information will be required to be included in the
additional annual filing, but rather grants the Secretary of the U.S. Treasury authority to decide what information must be included in such annual filing. The IRS has recently issued guidance providing that (1) persons that were required to
file Form 8621 prior to the enactment of the Reporting
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Legislation must continue to file Form 8621 as appropriate, and (2) pending the release of a revised Form 8621, shareholders of a PFIC that are not otherwise required to file Form 8621 as
provided in the current instructions to Form 8621 are not required to file Form 8621 as a result of the Reporting Legislation. Shareholders of a PFIC will, however, be required to attach the revised Form 8621 for taxable years beginning on or after
March 18, 2010 (if Form 8621 was not filed with respect to such taxable year) to their next income tax or informational return required to be filed with the IRS. If Brasil Telecom were a PFIC for a given taxable year, then U.S. Holders should
consult their tax adviser concerning their annual filing requirements.
Foreign Asset Reporting
For taxable years beginning after March 18, 2010, certain U.S. Holders who are individuals are required to report information
relating to the common shares, preferred shares or ADSs of Brasil Telecom, subject to certain exceptions (including an exception for common shares, preferred shares or ADSs of Brasil Telecom held in accounts maintained by certain financial
institutions). U.S. Holders that are individuals are urged to consult their tax advisers regarding their information reporting obligations with respect to their ownership of the units or the underlying shares.
Backup Withholding Tax and Information Reporting Requirements
U.S. backup withholding tax and information reporting requirements generally apply to certain payments to certain non-corporate holders. Information reporting generally will apply to the distributions
made on the common shares, preferred shares or ADSs of Brasil Telecom, and to proceeds from the sale or other disposition of the common shares, preferred shares or ADSs of Brasil Telecom or shares or ADSs of TNL made within the United States or by a
U.S. payor or U.S. middleman to a holder of common shares, preferred shares or ADSs of Brasil Telecom or shares or ADSs of TNL, other than an exempt recipient, including a corporation, a payee that is a non-U.S. person that provides an appropriate
certification and certain other persons. A payor will be required to withhold backup withholding tax from any distributions made on common shares, preferred shares or ADSs of Brasil Telecom, and to proceeds from the sale or other disposition of the
common shares, preferred shares or ADSs of Brasil Telecom or shares or ADSs of TNL made within the United States or by a U.S. payor or U.S. middleman to a holder of common shares, preferred shares or ADSs of Brasil Telecom or shares or ADSs of TNL,
other than an exempt recipient, if such holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such backup withholding tax requirements. The backup withholding tax rate
is 28% for taxable years through 2012.
Backup withholding is not an additional tax. A U.S. Holder generally may obtain a
refund of any amounts withheld under the backup withholding rules that exceed such holder’s U.S. federal income tax liability by filing a refund claim with the IRS. A U.S. Holder will be entitled to credit any amounts withheld under the backup
withholding rules against such holder’s U.S. federal income tax liability provided the required information is furnished to the IRS in a timely manner.
Past Contacts, Transacti
ons, Negotiations and Agreements
There have been no past, present or proposed material contracts, arrangements, understandings, relationships, negotiations or transactions during the periods for which financial statements are presented
or incorporated by reference into this prospectus between TNL or its affiliates and Brasil Telecom or its affiliates, other than (1) as described above under “—Background of the Merger,” (2) as described under “Item 7.
Major Shareholders and Related Party Transactions—Related Party Transactions” in the TNL Annual Report, which is incorporated by reference into this prospectus, (3) as described under “Item 7. Major Shareholders and Related Party
Transactions—Related Party Transactions” in the Brasil Telecom Annual Report, which is incorporated by reference into this prospectus, and (4) those set forth below.
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Acquisition of Brasil Telecom by TNL
As described under “Item 4. Information on the Company—Our History and Development—Acquisition of Brasil Telecom” in
the TNL Annual Report, which is incorporated by reference into this prospectus, on January 8, 2009, TNL acquired all of the outstanding shares of Invitel S.A., or Invitel, and 12,185,836 common shares of Brasil Telecom
Participações S.A., or Brasil Telecom Holding owned by the shareholders of Invitel for an aggregate purchase price of R$5,371 million. As of the date of this acquisition, Invitel owned 100% of the outstanding shares of Solpart
Participações S.A., or Solpart, which owned 52.0% of the outstanding voting share capital, representing 19.0% of the outstanding share capital, of Brasil Telecom Holding, which, in turn, owned 67.2% of the outstanding share capital,
including 99.1% of the outstanding voting share capital, of Brasil Telecom.
Following this acquisition, TNL owned an
aggregate of 43.5% of the outstanding share capital of Brasil Telecom Holding, including 61.2% of the outstanding common shares of Brasil Telecom Holding. In addition to the 67.2% of the outstanding share capital, including 99.1% of the outstanding
voting share capital, of Brasil Telecom that Brasil Telecom Holding owned directly, TNL owned 19.8% of the outstanding preferred shares, representing 10.7% of the outstanding share capital, of Brasil Telecom.
On June 23, 2009, TNL acquired (1) 40,452,227 common shares of Brasil Telecom Holding, representing 30.5% of the outstanding
common shares of Brasil Telecom Holding and 11.2% of the outstanding share capital of Brasil Telecom Holding, and (2) 630,872 common shares of Brasil Telecom, representing 0.3% of the outstanding common shares of Brasil Telecom and 0.1% of the
outstanding share capital of Brasil Telecom, as a result of mandatory tender offers we conducted for any and all outstanding common shares of Brasil Telecom Holding and Brasil Telecom.
On July 31, 2009:
|
|
•
|
|
Invitel merged with and into Solpart, with Solpart as the surviving company;
|
|
|
•
|
|
Solpart merged with and into Copart 1 Participações S.A., or Copart 1, an indirect wholly owned subsidiary of Telemar, with Copart 1 as
the surviving company;
|
|
|
•
|
|
Copart 1 merged with and into Brasil Telecom Holding, with Brasil Telecom Holding as the surviving company; and
|
|
|
•
|
|
Copart 2 Participações S.A., or Copart 2, an indirect wholly owned subsidiary of Telemar, merged with and into Brasil Telecom, with
Brasil Telecom as the surviving company.
|
As a result of these mergers, Coari owned 54.7% of the outstanding
share capital, including 91.7% of the outstanding voting share capital, of Brasil Telecom Holding, and 10.9% of the outstanding share capital, including 0.3% of the outstanding voting share capital, of Brasil Telecom.
On September 30, 2009, the shareholders of Brasil Telecom and Brasil Telecom Holding approved a merger
(
incorporação
) under Brazilian law of Brasil Telecom Holding with and into Brasil Telecom, with Brasil Telecom as the surviving company. As a result of the Brasil Telecom merger, Brasil Telecom Holding ceased to exist and TNL
indirectly controls 48.3% of the total outstanding share capital of Brasil Telecom, including 79.6% of its outstanding voting share capital.
Proposed Corporate Reorganization
In connection with the acquisition of Brasil Telecom, on April 25, 2008, TNL announced a proposed corporate reorganization consisting of (1) the merger of Brasil Telecom Holding with and into
Brasil Telecom that was completed on September 30, 2009, followed by (2) a merger of shares under Brazilian law
139
PART FIVE—THE MERGER
(
incorporação de ações
), in which shares of Coari would be issued in exchange for all shares of Brasil Telecom that Coari did not own and Brasil Telecom would
become a wholly-owned subsidiary of Coari, or the Coari share exchange, and (3) a merger (
incorporação
) under Brazilian law of Coari with and into Telemar, with Telemar as the surviving company.
On December 1, 2009, the Oi Companies announced the terms of the Coari share exchange. On January 14, 2010, the Oi Companies
announced that they had decided to postpone the Coari share exchange, because the proposed exchange ratio for the subsequent merger of Coari into TMAR that had been announced on April 25, 2008 did not consider the effects of an increase of the
provision for contingencies related to certain civil claims against Brasil Telecom in the gross amount of R$1,290 million, which Brasil Telecom was required to recognize in its financial statements for the year ended December 31, 2009.
On March 25, 2010, TNL and Telemar announced that the board of directors of Telemar had approved new exchange ratios for
the merger of Coari into TMAR, adjusted to reflect the modification of the provision for contingencies related to certain civil claims against Brasil Telecom. On April 22, 2010, the board of directors of Brasil Telecom approved the new exchange
ratios for the merger of Coari into TMAR, subject to the approval of the non-controlling holders of common and preferred shares of Brasil Telecom.
On June 16, 2010, the Oi Companies announced that at the general shareholders meeting of Brasil Telecom held on that date to consider the new exchange ratios for the merger of Coari into TMAR, the
non-controlling holders of common and preferred shares of Brasil Telecom did not approve the new exchange ratios, and that, as a result, the remaining steps of the proposed corporate reorganization were indefinitely suspended.
T
ransactions between Affiliates of TNL and Brasil Telecom
The Brazilian General Telecommunications Law requires all telecommunication service providers to interconnect their networks with those of
other providers on a non-discriminatory basis. As a result, Brasil Telecom, on the one hand, and Telemar and its subsidiaries, on the other hand, make certain interconnection payments to each other on terms established by ANATEL. During the
six-month period ended June 30, 2011, Telemar and its subsidiaries incurred expenses in the aggregate amount of R$101 million to Brasil Telecom and Brasil Telecom paid an aggregate of R$138 million to Telemar and its subsidiaries related to
interconnection payments.
In February 2009, Brasil Telecom Holding subscribed private debentures issued by Telemar. As a
result of the merger of Brasil Telecom Holding into our company on September 30, 2009, we became the holders of these debentures. In March 2009, Brasil Telecom Mobile subscribed additional private debentures issued by Telemar. The outstanding
principal amount of these debentures is payable at maturity in December 2013. These debentures bear interest at a rate of CDI plus 4.0% per annum, payable with the principal at maturity. As of June 30, 2011, the outstanding amount of
these debentures was R$2,056 million.
TNL has provided guarantees of all of Brasil Telecom’s indebtedness to BNDES. In
addition, TNL provides a guarantee of Brasil Telecom’s debentures through a surety. Brasil Telecom incurred expenses in the amount of R$23 million during the six-month period ended June 30, 2011 with respect to these guarantees.
Intere
sts of Certain Persons in the Merger
You should be aware that certain members of the boards of directors and the management of Brasil Telecom and TNL may have interests in
the merger that differ from yours.
As of August 26, 2011, none of the members of the board of directors or the board of
executive officers of TNL or Brasil Telecom owned, directly or indirectly, more than 0.1% of any class of shares of Brasil Telecom or TNL, including through the exercise of options to acquire those shares.
140
PART FIVE—THE MERGER
All of the members of the board of directors of TNL are
nominees of shareholders of TmarPart and four of the five members of the board of directors of Brasil Telecom are nominees of TmarPart. Under shareholders agreements among the shareholders of TmarPart, the shareholders of TmarPart (AG Telecom,
Luxemburgo Participações S.A., L.F. Tel S.A., Bratel, BNDESPar, FASS, PREVI, PETROS and FUNCEF) have the power to select the chief executive officers of each of TNL and Brasil Telecom.
The chief executive officer of TNL, who is selected by these shareholders, has the power to select the other executive officers of TNL,
and in conjunction with the chief executive officer of Brasil Telecom, to select the other executive officers of Brasil Telecom. For a description of the terms of these shareholders agreements, see “Item 7. Major Shareholders and Related Party
Transactions—Major Shareholders—TmarPart Shareholders’ Agreements” in the Brasil Telecom Annual Report, which is incorporated by reference into this prospectus.
As a result of the corporate reorganization, assuming that none of the shareholders of TNL, Telemar or Coari exercises withdrawal rights
with respect to any of the proposed transactions:
|
|
•
|
|
the direct interest in Brasil Telecom of TmarPart and Valverde, who prior to the corporate reorganization will indirectly control an aggregate of
approximately 49.3% of the outstanding share capital of Brasil Telecom, including approximately 79.6% of its outstanding voting share capital, will be approximately 16.4% of its outstanding share capital, including approximately 50.6% of its
outstanding voting share capital;
|
|
|
•
|
|
the shareholders of TmarPart, who prior to the corporate reorganization will not hold any shares of Brasil Telecom, will hold approximately 26.6% of
the outstanding capital stock of Brasil Telecom, including approximately 10.2% of its outstanding voting share capital;
|
|
|
•
|
|
former shareholders of TNL, other than TmarPart, Valverde and the shareholders of TmarPart, will hold approximately 32.0% of the outstanding capital
stock of Brasil Telecom, including approximately 27.3% of its outstanding voting share capital;
|
|
|
•
|
|
former shareholders of Telemar, other than TNL, TmarPart, Valverde and the shareholders of TmarPart, will hold approximately 8.1% of the outstanding
capital stock of Brasil Telecom, including approximately 4.7% of its outstanding voting share capital;
|
|
|
•
|
|
non-controlling shareholders of Brasil Telecom, who prior to the corporate reorganization will hold an aggregate of approximately 50.6% of the
outstanding share capital of Brasil Telecom, including approximately 20.4% of its outstanding voting share capital, will hold an aggregate of approximately 16.9% of the outstanding share capital of Brasil Telecom, including approximately 7.2% of its
outstanding voting share capital.
|
141
PART SIX—SHAREHOLDER RIGHTS
General
Brasil Telecom and TNL are incorporated in Brazil.
If you hold common or
preferred shares of Brasil Telecom or TNL, your rights as a holder of securities are governed by Brazilian law and the by-laws (
estatutos sociais
) of the applicable company. If you hold common shares or preferred shares of TNL, your rights as
a holder of Brasil Telecom securities after the share exchange will be governed by Brazilian law and the by-laws of Brasil Telecom. You should read the by-laws of Brasil Telecom, a copy of which is filed as an exhibit to the registration statement
of which this prospectus is a part.
There are certain differences between the rights of common shareholders and preferred
shareholders of Brasil Telecom and those of common shareholders and preferred shareholders of TNL. The following table summarizes certain similarities and differences in the rights of common shares and preferred shares of TNL compared to common
shares and preferred shares of Brasil Telecom.
|
|
|
|
|
Voting Rights and Dividend Rights of Common Shares and Preferred
Shares
|
|
TNL
|
|
BRASIL TELECOM
|
|
|
|
|
Common Shares
|
|
Common Shares
|
|
Voting Rights:
|
|
Voting Rights:
|
|
Each common share is entitled to one vote in all decisions taken by the General Shareholders’ Meeting.
|
|
Each common share is entitled to one vote in all decisions taken by the General Shareholders’ Meeting.
|
|
|
|
|
Dividend Rights
:
|
|
Dividend Rights
:
|
|
Minimum mandatory dividend of 25% of the adjusted net profits, subject to the dividend preference of the preferred shares.
|
|
Minimum mandatory dividend of 25% of the adjusted net profits, subject to the dividend preference of the preferred shares.
|
|
|
|
|
Preferred Shares
|
|
Preferred Shares
|
|
Voting Rights:
|
|
Voting Rights:
|
|
The preferred shares have no voting rights, except in the following limited circumstances:
|
|
The preferred shares have no voting rights, except in the following limited circumstances:
|
|
(a) to vote, in a general shareholders’ meeting, on proposals to approve long-term agreements between
TNL and its related parties (subsidiaries, controlling shareholders, companies under common control), except for market standard agreements.
|
|
(a) to elect, through a separate ballot of the preferred shareholders, a member and respective alternate
of the board of directors of Brasil Telecom.
|
|
(b) to vote, in a general shareholders’ meeting, on proposals to amend or repeal provisions of
TNL’s by-laws requiring (1) shareholder approval for long-term agreements between TNL and its related parties, as described above, (2) a 30-day prior notice to call those special shareholders’ meetings that require a two-thirds
quorum to be convened, and (3) the preparation of an economic-financial analysis by independent experts before mergers, spin-offs, consolidations or the dissolution of any of TNL’s subsidiaries can be approved.
|
|
(b) to amend, though the separate approval of the preferred shareholders, Article 25, Paragraph 2 of the
bylaws of Brasil Telecom, providing for the right of the preferred shareholders to elect a member and respective alternate of the board of directors of Brasil Telecom, as described above.
|
|
|
|
(c) to decide, through a separate ballot of the preferred shareholders, on the contracting of foreign
entities linked to the controlling shareholders of Brasil Telecom to provide management services, including technical assistance.
|
142
PART SIX—SHAREHOLDER RIGHTS
|
|
|
|
|
Voting Rights and Dividend Rights of Common Shares and Preferred
Shares
|
|
TNL
|
|
BRASIL TELECOM
|
|
|
|
(d) to decide, in a general shareholders’ meeting, on the contracting of foreign entities linked to
the controlling shareholders of Brasil Telecom to provide management services, including technical assistance, if the remuneration for such services does not exceed 0.2% of Brasil Telecom’s consolidated annual sales for Fixed Switched Telephone
Service of the Telecommunication Transport Network Service and the Mobile Highway Telephone Service, after deductions of tax and contributions
|
|
If TNL fails to pay the minimum dividends to which the preferred shares are entitled for three consecutive fiscal years, the preferred shares will acquire unrestricted voting
rights.
|
|
If Brasil Telecom fails to pay the minimum dividends to which the preferred shares are entitled for three consecutive fiscal years, the preferred shares will acquire unrestricted
voting rights.
|
|
|
|
|
Dividend Preference:
|
|
Dividend Preference:
|
|
(a) Preferred shares have a priority in the payment of a minimum non-cumulative dividend before dividends
may be paid on the common shares equal to the greater of:
|
|
(a) Preferred shares have a priority in the payment of a minimum non-cumulative dividend before dividends
may be paid on the common shares equal to the greater of:
|
|
(i) 6.0% per year of their
pro rata
share of TNL’s capital; or
|
|
(i) 6.0% per year of their
pro rata
share of Brasil Telecom’s capital;
or
|
|
(ii) 3.0% per year of their
pro rata
share of the book value of TNL’s shareholders’
equity.
|
|
(ii) 3.0% per year of their
pro rata
share of the book value of Brasil Telecom’s
shareholders’ equity.
|
|
(b) Following the allocation of the preferential amount described above, the common shares will receive
dividends up to the amount distributed to the preferred shares; the preferred and common shares have the right to share in the balance of the mandatory minimum dividend under equal conditions.
|
|
(b) Following the allocation of the preferential amount described above, the common shares will receive
dividends up to the amount distributed to the preferred shares; the preferred and common shares have the right to share in the balance of the mandatory minimum dividend under equal conditions.
|
If you hold TNL ADSs, your rights are governed by TNL’s deposit agreements rather than by Brazilian
law and the bylaws of TNL, and your rights as a holder of Brasil Telecom ADSs after the share exchange will be governed by Brasil Telecom’s deposit agreements. See “—Description of Brasil Telecom ADSs.”
143
PART SIX—SHAREHOLDER RIGHTS
C
omparative Share and Dividend
Information
Historical Share Information
Brasil Telecom
The principal trading market for the common shares
and preferred shares of Brasil Telecom is the BM&FBOVESPA, where they are traded under the symbols “BRTO3” and “BRTO4,” respectively. The common shares and preferred shares of Brasil Telecom began trading on the
BM&FBOVESPA on July 10, 1992. On November 16, 2001, the Brasil Telecom Preferred ADSs began trading on the NYSE under the symbol “BTM.” On November 17, 2009, the Brasil Telecom Common ADSs began trading on the NYSE under
the symbol “BTMC.”
The tables below sets forth the high and low closing sales prices and the approximate average
daily trading volume for the common shares and preferred shares of Brasil Telecom on the BM&FBOVESPA and the high and low closing sales prices and the approximate average daily trading volume for the Brasil Telecom Common and Preferred ADSs on
the NYSE for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BM&FBOVESPA
|
|
|
NYSE
|
|
|
|
|
Reais per Common Share
|
|
|
U.S. dollars per Common ADS
|
|
|
|
|
Closing Price per
Common Share
|
|
|
Average
Daily
Trading
Volume
|
|
|
Closing Price per
Common ADS
|
|
|
Average
Daily
Trading
Volume
|
|
|
|
High
|
|
|
Low
|
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
(in reais)
|
|
|
(thousands
of shares)
|
|
|
(in U.S. dollars)
|
|
|
(thousands of
Common
ADSs)(1)
|
|
|
2006
|
|
|
27.85
|
|
|
|
17.00
|
|
|
|
1.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
2007
|
|
|
37.50
|
|
|
|
24.99
|
|
|
|
1.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
2008
|
|
|
55.50
|
|
|
|
31.10
|
|
|
|
3.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
2009
|
|
|
61.00
|
|
|
|
25.70
|
|
|
|
36.9
|
|
|
|
17.85
|
|
|
|
15.27
|
|
|
|
29.6
|
|
|
2010
|
|
|
28.55
|
|
|
|
13.75
|
|
|
|
111.1
|
|
|
|
16.44
|
|
|
|
7.19
|
|
|
|
70.8
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
60.00
|
|
|
|
54.05
|
|
|
|
5.5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Second Quarter
|
|
|
61.00
|
|
|
|
55.50
|
|
|
|
1.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Third Quarter
|
|
|
35.50
|
|
|
|
26.90
|
|
|
|
0.5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Fourth Quarter
|
|
|
31.94
|
|
|
|
25.70
|
|
|
|
111.1
|
|
|
|
17.85
|
|
|
|
15.27
|
|
|
|
29.6
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
28.55
|
|
|
|
15.51
|
|
|
|
129.8
|
|
|
|
16.44
|
|
|
|
8.27
|
|
|
|
40.4
|
|
|
Second Quarter
|
|
|
18.60
|
|
|
|
13.75
|
|
|
|
196.1
|
|
|
|
10.25
|
|
|
|
7.19
|
|
|
|
153.5
|
|
|
Third Quarter
|
|
|
16.58
|
|
|
|
14.40
|
|
|
|
67.5
|
|
|
|
9.12
|
|
|
|
8.01
|
|
|
|
41.8
|
|
|
Fourth Quarter
|
|
|
16.49
|
|
|
|
14.36
|
|
|
|
51.9
|
|
|
|
9.61
|
|
|
|
8.13
|
|
|
|
47.4
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
17.69
|
|
|
|
15.28
|
|
|
|
57.0
|
|
|
|
10.83
|
|
|
|
9.13
|
|
|
|
14.7
|
|
|
Second Quarter
|
|
|
18.45
|
|
|
|
16.20
|
|
|
|
104.2
|
|
|
|
11.65
|
|
|
|
10.59
|
|
|
|
16.3
|
|
|
|
|
|
|
|
|
|
|
Most Recent Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2011
|
|
|
17.09
|
|
|
|
16.20
|
|
|
|
35.1
|
|
|
|
10.16
|
|
|
|
9.74
|
|
|
|
11.9
|
|
|
March 2011
|
|
|
17.69
|
|
|
|
16.10
|
|
|
|
69.3
|
|
|
|
10.83
|
|
|
|
9.64
|
|
|
|
9.5
|
|
|
April 2011
|
|
|
18.45
|
|
|
|
16.87
|
|
|
|
134.9
|
|
|
|
11.65
|
|
|
|
10.59
|
|
|
|
16.5
|
|
|
May 2011
|
|
|
17.98
|
|
|
|
16.50
|
|
|
|
82.1
|
|
|
|
11.03
|
|
|
|
10.07
|
|
|
|
18.4
|
|
|
June 2011
|
|
|
17.47
|
|
|
|
16.20
|
|
|
|
99.4
|
|
|
|
10.98
|
|
|
|
9.88
|
|
|
|
14.0
|
|
|
July 2011
|
|
|
17.00
|
|
|
|
15.19
|
|
|
|
57.7
|
|
|
|
10.72
|
|
|
|
9.42
|
|
|
|
12.8
|
|
|
August 2011 (1)
|
|
|
13.68
|
|
|
|
11.80
|
|
|
|
70.1
|
|
|
|
8.72
|
|
|
|
7.41
|
|
|
|
21.4
|
|
|
(1)
|
Through August 26, 2011.
|
Source
:
Economática Ltda./ Bloomberg
144
PART SIX—SHAREHOLDER RIGHTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BM&FBOVESPA
|
|
|
NYSE
|
|
|
|
|
Reais per Preferred Share
|
|
|
U.S. dollars per Preferred ADS
|
|
|
|
|
Closing Price per
Preferred Share
|
|
|
Average
Daily
Trading
Volume
|
|
|
Closing Price per
Preferred ADS
|
|
|
Average Daily
Trading Volume
|
|
|
|
High
|
|
|
Low
|
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
(in reais)
|
|
|
(thousands
of shares)
|
|
|
(in U.S. dollars)
|
|
|
(thousands of
Preferred ADSs)
|
|
|
2006
|
|
|
11.30
|
|
|
|
7.45
|
|
|
|
1,392.6
|
|
|
|
15.92
|
|
|
|
10.14
|
|
|
|
88.8
|
|
|
2007
|
|
|
18.50
|
|
|
|
9.77
|
|
|
|
1,353.8
|
|
|
|
31.32
|
|
|
|
13.79
|
|
|
|
137.1
|
|
|
2008
|
|
|
20.94
|
|
|
|
10.81
|
|
|
|
1,061.6
|
|
|
|
37.80
|
|
|
|
14.45
|
|
|
|
185.9
|
|
|
2009
|
|
|
18.29
|
|
|
|
11.06
|
|
|
|
600.6
|
|
|
|
32.40
|
|
|
|
13.59
|
|
|
|
98.1
|
|
|
2010
|
|
|
17.43
|
|
|
|
10.45
|
|
|
|
899.6
|
|
|
|
30.91
|
|
|
|
17.06
|
|
|
|
270.4
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
14.80
|
|
|
|
11.06
|
|
|
|
477.4
|
|
|
|
19.60
|
|
|
|
13.59
|
|
|
|
88.2
|
|
|
Second Quarter
|
|
|
14.90
|
|
|
|
12.01
|
|
|
|
613.1
|
|
|
|
22.15
|
|
|
|
17.38
|
|
|
|
86.9
|
|
|
Third Quarter
|
|
|
15.68
|
|
|
|
12.03
|
|
|
|
630.2
|
|
|
|
26.32
|
|
|
|
18.51
|
|
|
|
77.3
|
|
|
Fourth Quarter
|
|
|
18.29
|
|
|
|
14.78
|
|
|
|
681.7
|
|
|
|
32.40
|
|
|
|
25.29
|
|
|
|
139.2
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
17.43
|
|
|
|
11.38
|
|
|
|
1,002.33
|
|
|
|
30.91
|
|
|
|
18.68
|
|
|
|
206.4
|
|
|
Second Quarter
|
|
|
12.63
|
|
|
|
10.45
|
|
|
|
1,082.29
|
|
|
|
21.21
|
|
|
|
17.06
|
|
|
|
263.4
|
|
|
Third Quarter
|
|
|
12.46
|
|
|
|
10.81
|
|
|
|
580.3
|
|
|
|
20.98
|
|
|
|
18.30
|
|
|
|
197.4
|
|
|
Fourth Quarter
|
|
|
13.35
|
|
|
|
11.23
|
|
|
|
947.9
|
|
|
|
23.61
|
|
|
|
19.90
|
|
|
|
425.5
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
14.56
|
|
|
|
12.25
|
|
|
|
751.3
|
|
|
|
27.01
|
|
|
|
22.53
|
|
|
|
230.8
|
|
|
Second Quarter
|
|
|
16.77
|
|
|
|
14.38
|
|
|
|
937.8
|
|
|
|
31.00
|
|
|
|
26.96
|
|
|
|
294.0
|
|
|
|
|
|
|
|
|
|
|
Most Recent Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2011
|
|
|
13.24
|
|
|
|
12.55
|
|
|
|
614.9
|
|
|
|
24.19
|
|
|
|
23.05
|
|
|
|
196.4
|
|
|
March 2011
|
|
|
14.56
|
|
|
|
12.54
|
|
|
|
829.8
|
|
|
|
27.01
|
|
|
|
22.53
|
|
|
|
246.6
|
|
|
April 2011
|
|
|
16.44
|
|
|
|
14.60
|
|
|
|
1,055.3
|
|
|
|
31.24
|
|
|
|
27.68
|
|
|
|
341.5
|
|
|
May 2011
|
|
|
16.77
|
|
|
|
14.48
|
|
|
|
948.1
|
|
|
|
31.24
|
|
|
|
26.96
|
|
|
|
292.6
|
|
|
June 2011
|
|
|
16.04
|
|
|
|
14.38
|
|
|
|
820.7
|
|
|
|
31.00
|
|
|
|
27.00
|
|
|
|
252.3
|
|
|
July 2011
|
|
|
14.87
|
|
|
|
12.92
|
|
|
|
617.5
|
|
|
|
28.79
|
|
|
|
25.25
|
|
|
|
249.5
|
|
|
August 2011 (1)
|
|
|
12.75
|
|
|
|
10.60
|
|
|
|
1,128.8
|
|
|
|
24.79
|
|
|
|
20.20
|
|
|
|
351.7
|
|
|
(1)
|
Through August 26, 2011.
|
Source
:
Economática Ltda./ Bloomberg
On August 26, 2011, the closing sales price of:
|
|
•
|
|
Brasil Telecom common shares on the BM&FBOVESPA was R$12.50 per share;
|
|
|
•
|
|
Brasil Telecom Common ADSs on the NYSE was US$7.59 per ADS;
|
|
|
•
|
|
Brasil Telecom preferred shares on the BM&FBOVESPA was R$11.07 per share; and
|
|
|
•
|
|
Brasil Telecom Preferred ADSs on the NYSE was US$20.99 per ADS.
|
145
PART SIX—SHAREHOLDER RIGHTS
TNL
The principal trading market for the common shares and preferred shares of TNL is the BM&FBOVESPA, where they are traded under the
symbols “TNLP3” and “TNLP4,” respectively. The common shares and preferred shares of TNL began trading on the BM&FBOVESPA on September 21, 1998. On November 16, 1998, ADSs representing TNL’s preferred shares,
or the TNL ADSs, began trading on the NYSE under the symbol “TNE.”
The table below sets forth the high and low
closing sales prices and the approximate average daily trading volume for the preferred shares of TNL on the BM&FBOVESPA and the high and low closing sales prices and the approximate average daily trading volume for the TNL ADSs on the NYSE for
the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BM&FBOVESPA
|
|
|
NYSE
|
|
|
|
|
Reais per Preferred Share
|
|
|
U.S. dollars per ADS
|
|
|
|
|
Closing Price per
Preferred Share
|
|
|
Average
Daily
Trading
Volume
|
|
|
Closing Price
per ADS
|
|
|
Average
Daily
Trading
Volume
|
|
|
|
High
|
|
|
Low
|
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
(in reais)
|
|
|
(thousands
of shares)
|
|
|
(in U.S. dollars)
|
|
|
(thousand
of ADSs)
|
|
|
2006
|
|
|
41.60
|
|
|
|
26.22
|
|
|
|
2,037.6
|
|
|
|
19.24
|
|
|
|
11.65
|
|
|
|
1,876.0
|
|
|
2007
|
|
|
43.95
|
|
|
|
25.80
|
|
|
|
1,675.4
|
|
|
|
23.30
|
|
|
|
12.30
|
|
|
|
1,983.6
|
|
|
2008
|
|
|
47.40
|
|
|
|
23.60
|
|
|
|
1,242.3
|
|
|
|
27.75
|
|
|
|
10.32
|
|
|
|
1,760.0
|
|
|
2009
|
|
|
38.90
|
|
|
|
26.10
|
|
|
|
1,047.5
|
|
|
|
22.67
|
|
|
|
11.23
|
|
|
|
1,474.8
|
|
|
2010
|
|
|
37.70
|
|
|
|
23.30
|
|
|
|
1,180.9
|
|
|
|
22.10
|
|
|
|
13.23
|
|
|
|
1,862.9
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
33.10
|
|
|
|
26.10
|
|
|
|
938.7
|
|
|
|
14.68
|
|
|
|
11.23
|
|
|
|
1,482.0
|
|
|
Second Quarter
|
|
|
35.11
|
|
|
|
30.00
|
|
|
|
1,087.3
|
|
|
|
18.47
|
|
|
|
14.31
|
|
|
|
1,427.8
|
|
|
Third Quarter
|
|
|
34.50
|
|
|
|
26.99
|
|
|
|
1,191.6
|
|
|
|
19.26
|
|
|
|
13.72
|
|
|
|
1,452.0
|
|
|
Fourth Quarter
|
|
|
38.90
|
|
|
|
32.37
|
|
|
|
963.9
|
|
|
|
22.67
|
|
|
|
18.13
|
|
|
|
1,536.8
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
37.70
|
|
|
|
30.81
|
|
|
|
900.1
|
|
|
|
22.10
|
|
|
|
16.86
|
|
|
|
1,839.2
|
|
|
Second Quarter
|
|
|
33.24
|
|
|
|
25.00
|
|
|
|
1,368.8
|
|
|
|
18.83
|
|
|
|
13.55
|
|
|
|
2,169.6
|
|
|
Third Quarter
|
|
|
30.60
|
|
|
|
23.30
|
|
|
|
1,384.8
|
|
|
|
17.27
|
|
|
|
13.23
|
|
|
|
1,596.4
|
|
|
Fourth Quarter
|
|
|
26.45
|
|
|
|
23.60
|
|
|
|
1,052.1
|
|
|
|
15.57
|
|
|
|
13.75
|
|
|
|
1,798.7
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
28.75
|
|
|
|
24.85
|
|
|
|
1,081.4
|
|
|
|
17.62
|
|
|
|
14.98
|
|
|
|
1,581.5
|
|
|
Second Quarter
|
|
|
30.18
|
|
|
|
23.80
|
|
|
|
1,209.7
|
|
|
|
18.18
|
|
|
|
15.28
|
|
|
|
2,676.5
|
|
|
|
|
|
|
|
|
|
|
Most Recent Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2011
|
|
|
27.00
|
|
|
|
25.80
|
|
|
|
989.2
|
|
|
|
16.37
|
|
|
|
15.41
|
|
|
|
1,439.5
|
|
|
March 2011
|
|
|
28.75
|
|
|
|
24.84
|
|
|
|
990.0
|
|
|
|
17.62
|
|
|
|
15.37
|
|
|
|
1,436.5
|
|
|
April 2011
|
|
|
30.18
|
|
|
|
27.49
|
|
|
|
1,267.7
|
|
|
|
19.18
|
|
|
|
17.61
|
|
|
|
1,948.0
|
|
|
May 2011
|
|
|
29.90
|
|
|
|
25.53
|
|
|
|
1,404.6
|
|
|
|
18.79
|
|
|
|
16.02
|
|
|
|
3,887.8
|
|
|
June 2011
|
|
|
27.50
|
|
|
|
23.80
|
|
|
|
866.0
|
|
|
|
17.65
|
|
|
|
15.28
|
|
|
|
2,113.9
|
|
|
July 2011
|
|
|
24.15
|
|
|
|
20.95
|
|
|
|
915.6
|
|
|
|
15.72
|
|
|
|
13.63
|
|
|
|
1,483.7
|
|
|
August 2011 (1)
|
|
|
21.90
|
|
|
|
19.25
|
|
|
|
1,146.1
|
|
|
|
14.33
|
|
|
|
12.03
|
|
|
|
1,961.6
|
|
|
(1)
|
Through August 26, 2011.
|
Source
:
Economática Ltda./ Bloomberg
146
PART SIX—SHAREHOLDER RIGHTS
On August 26, 2011, the closing sales price of:
|
|
•
|
|
TNL’s preferred shares on the BM&FBOVESPA was R$19.27 per share; and
|
|
|
•
|
|
TNL’s ADSs on the NYSE was US$12.21 per ADS.
|
Information About Historical Dividend Payments
Brasil
Telecom
The following table sets forth the dividends and/or interest attributable to shareholders’ equity paid to
holders of common shares and preferred shares of Brasil Telecom since January 1, 2006 in
reais
and in U.S. dollars translated from
reais
at the selling rate in effect as of the payment date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominal
Reais
per
|
|
|
US$ equivalent per
|
|
|
Year
|
|
Payment Date
|
|
Common
Shares
|
|
|
Preferred
Shares
|
|
|
Common
Shares
|
|
|
Preferred
Shares
|
|
|
2007
|
|
May 31, 2007 (1)
|
|
|
0.7506
|
|
|
|
0.7506
|
|
|
|
0.3891
|
|
|
|
0.3891
|
|
|
2008
|
|
April 16, 2008 (2)
|
|
|
1.3840
|
|
|
|
1.3840
|
|
|
|
0.8288
|
|
|
|
0.8288
|
|
|
2009
|
|
August 10, 2009 (3)
|
|
|
0.5924
|
|
|
|
0.5924
|
|
|
|
0.3217
|
|
|
|
0.3217
|
|
|
2011
|
|
January 21, 2011 (3)
|
|
|
0.1798
|
|
|
|
0.1798
|
|
|
|
0.1075
|
|
|
|
0.1075
|
|
|
|
|
May 9, 2011 (4)
|
|
|
0.7352
|
|
|
|
0.7352
|
|
|
|
0.4539
|
|
|
|
0.4539
|
|
|
(1)
|
Represents interest attributable to shareholders’ equity of R$0.6375 (US$0.3305) per common and preferred share, plus dividends of R$0.1131 (US$0.0586) per common
and preferred share.
|
|
(2)
|
Represents interest attributable to shareholders’ equity of R$0.6403 (US$0.3834) per common and preferred share, plus dividends of R$0.7437 (US$0.4454) per common
and preferred share.
|
|
(3)
|
Represents interest attributable to shareholders’ equity.
|
|
(4)
|
Represents interest attributable to shareholders’ equity of R$0.4360 (US$0.2692) per common and preferred share, plus dividends of R$0.2992(US$0.1847) per common
and preferred share.
|
TNL
The following table sets forth the dividends and/or interest attributable to shareholders’ equity paid to holders of common shares and preferred shares of TNL since January 1, 2006 in
reais
and in U.S. dollars translated from
reais
at the selling rate in effect as of the payment date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominal
Reais
per
|
|
|
US$ equivalent per
|
|
|
Year
|
|
Payment Date
|
|
Common
Shares
|
|
|
Preferred
Shares
|
|
|
Common
Shares
|
|
|
Preferred
Shares
|
|
|
2006
|
|
April 24, 2006 (1)
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|
|
2.0585
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|
|
|
2.0585
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|
|
|
0.9718
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|
|
|
0.9718
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|
|
2007
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|
April 20, 2007 (2)
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|
0.8635
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|
|
|
0.8635
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|
|
|
0.4262
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|
|
|
0.4262
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|
2008
|
|
April 15, 2008 (3)
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|
|
1.7572
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|
|
|
1.7572
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|
|
|
1.0446
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|
|
|
1.0446
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|
|
|
|
September 19, 2008
|
|
|
3.1390
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|
|
|
3.1390
|
|
|
|
1.7062
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|
|
|
1.7062
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|
|
2009
|
|
February 18, 2009
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|
|
3.1300
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|
|
|
3.1300
|
|
|
|
1.3378
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|
|
|
1.3378
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|
|
|
|
October 30, 2009 (4)
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|
|
2.7994
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|
|
|
2.7994
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|
|
|
1.6052
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|
|
|
1.6052
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|
2010
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|
May 25, 2010
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|
|
3.1369
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|
|
|
3.1369
|
|
|
|
1.6676
|
|
|
|
1.6676
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|
|
2011
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|
May 6, 2011
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|
|
0.5932
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|
|
|
0.8155
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|
|
|
0.3682
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|
|
|
0.5062
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|
|
(1)
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Represents interest attributable to shareholders’ equity of R$0.5585 (US$0.2634) per common and preferred share, plus dividends of R$1.5000 (US$0.7081) per common
and preferred share.
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(2)
|
Represents interest attributable to shareholders’ equity of R$0.7850 (US$0.3874) per common and preferred share, plus dividends of R$0.0785 (US$0.0387) per common
and preferred share.
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147
PART SIX—SHAREHOLDER RIGHTS
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(3)
|
Represents interest attributable to shareholders’ equity of R$1.5478 (US$0.9201) per common and preferred share, plus dividends of R$0.2094 (US$0.1245) per common
and preferred share.
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(4)
|
Represents interest attributable to shareholders’ equity of R$0.7306 (US$0.4189) per common and preferred share, plus dividends of R$2.0688 (US$1.1862) per common
and preferred share.
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Description of Brasil Telecom Capital Stock
The following is a summary of the material provisions of our bylaws and of the Brazilian Corporation Law. In Brazil, a company’s
bylaws (
estatuto social
) are the principal governing document of a corporation (
sociedade anônima
).
General
Our registered name is Brasil Telecom S.A., and our registered office is located in the City of Rio de
Janeiro, State of Rio de Janeiro, Brazil. Our registration number with the Brazilian Commercial Registry is No. 33.3.0029520-8. We have been duly registered with the CVM under No. 11312 since March 27, 1980. Our headquarters are
located in City of Rio de Janeiro, State of Rio de Janeiro, Brazil. Our company has a perpetual existence.
At August 26,
2011, we had outstanding share capital of R$3,731,058,950.28, equal to 603,020,546 total shares, consisting of 203,423,176 issued common shares and 399,597,370 issued preferred shares, including 13,231,553 preferred shares held in treasury. All of
our outstanding share capital is fully paid. All of our shares are without par value. Under the Brazilian Corporation Law, the aggregate number of our non-voting and limited voting preferred shares may not exceed two-thirds of our total outstanding
share capital.
At the extraordinary general shareholders’ meeting of Brasil Telecom called to consider the merger, which
will also consider the Coari merger, the holders of common shares of Brasil Telecom will also vote to amend the bylaws of Brasil Telecom to increase its share capital, which is necessary to accommodate the issuance of the new common shares and
preferred shares of Brasil Telecom that will be issued in the Coari merger and the merger, to R$6,816,467,847.01 represented by 1,797,069,689 shares, consisting of 598,999,380 common shares and 1,198,070,309 preferred shares.
Corporate Purposes
Under Article 2 of our by-laws, our corporate purposes are:
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to offer telecommunication services and all activities required or useful for the operation of these services, in conformity with our concessions,
authorizations and permits;
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to participate in the capital of other companies seeking to fulfill the national telecommunications policy;
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to organize wholly-owned subsidiaries for the performance of activities consistent with our corporate purposes;
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•
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to import, or promote the importation of, goods and services that are necessary to the performance of activities consistent with our corporate
purposes;
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to provide technical assistance services to other telecommunications companies engaged in activities of common interest;
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to perform study and research activities aimed at the development of the telecommunications sector;
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PART SIX—SHAREHOLDER RIGHTS
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to enter into contracts and agreements with other telecommunications companies or other persons or entities to assure the operations of our services;
and
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to perform other activities related to the above corporate purposes.
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Board of Directors
Under the Brazilian
Corporation Law, any matters subject to the approval of our board of directors can be approved by a simple majority of votes of the members present at a duly convened meeting, unless our by-laws otherwise specify. Under our by-laws, our board of
directors may only deliberate if a majority of its members are present at a duly convened meeting. Any resolutions of our board of directors may be approved by the affirmative vote of a majority of the members present at the meeting.
Election of Directors
The shareholders of TmarPart, our controlling shareholder, have entered into shareholders agreements that determine the representation of these shareholders on our board of directors. See “Part
Four—The Companies—Principal Shareholders of Brasil Telecom and Related Party Transactions—Principal Shareholders—TmarPart Shareholders’ Agreements.” The members of our board of directors are elected at general meetings
of shareholders for concurrent three-year terms.
Qualification of Directors
The Brazilian Corporation Law requires members of our board of directors to own shares of our company. However, there is no minimum share
ownership or residency requirement to qualify for membership on our board of directors. Our by-laws do not require the members of our board of directors to be residents of Brazil. The Brazilian Corporation Law requires each of our executive officers
to be residents of Brazil.
Fiduciary Duties and Conflicts of Interest
All members of our board of directors and their alternates owe fiduciary duties to us and all of our shareholders.
Under the Brazilian Corporation Law, if one of our directors or his respective alternate or one of our executive officers has a conflict
of interest with our company in connection with any proposed transaction, such director, alternate director or executive officer may not vote in any decision of our board of directors or of our board of executive officers, as the case may be,
regarding such transaction and must disclose the nature and extent of his conflicting interest for inclusion in the minutes of the applicable meeting. However, if one of our directors is absent from a meeting of our board of directors, that
director’s alternate may vote even if that director has a conflict of interest, unless the alternate director shares that conflict of interest or has another conflict of interest.
Any transaction in which one of our directors (including the alternate members) or executive officers may have an interest, including any
financings, can only be approved on reasonable and fair terms and conditions that are no more favorable than the terms and conditions prevailing in the market or offered by third parties. If any such transaction does not meet this requirement, then
the Brazilian Corporation Law provides that the transaction may be nullified and the interested director or executive officer must return to us any benefits or other advantages that he obtained from, or as result of, such transaction. Under the
Brazilian Corporation Law and upon the request of a shareholder who owns at least 5.0% of our total share capital, our directors and executive officers must reveal to our shareholders at an ordinary meeting of our shareholders certain transactions
and circumstances that may give rise to a conflict of interest. In addition, our company or shareholders who own 5.0% or more of our share capital may bring an action for civil liability against directors and executive officers for any losses caused
to us as a result of a conflict of interest.
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PART SIX—SHAREHOLDER RIGHTS
Compensation
Under our by-laws, our common shareholders approve the aggregate compensation payable to our directors, executive officers and members of
our fiscal council. Subject to this approval, our board of directors establishes the compensation of its members and of our executive officers. See “Part Five—The Merger—Management of Brasil Telecom—Compensation.”
Mandatory Retirement
Neither the Brazilian Corporation Law nor our by-laws establish any mandatory retirement age for our directors or executive officers.
Share Capital
Under the Brazilian Corporation
Law, the number of our issued and outstanding non-voting shares or shares with limited voting rights, such as our preferred shares, may not exceed two-thirds of our total outstanding share capital.
Each of our common shares entitles its holder to one vote at our annual and extraordinary shareholders’ meetings. Holders of our
common shares are not entitled to any preference in respect of our dividends or other distributions or otherwise in case of our liquidation.
Our preferred shares are non-voting, except in limited circumstances, and do not have priority over our common shares in the case of our liquidation.
Dividends
Our dividend distribution policy has historically included the distribution of periodic dividends, based on annual balance sheets approved by our board of directors. When we pay dividends on an annual
basis, they are declared at our annual shareholders’ meeting, which we are required by the Brazilian Corporation Law and our by-laws to hold by April 30 of each year. When we declare dividends, we are generally required to pay them within
60 days of declaring them unless the shareholders’ resolution establishes another payment date. In any event, if we declare dividends, we must pay them by the end of the fiscal year for which they are declared. Under Article 9 of Law 9,249/95
and our by-laws, we also may pay interest attributable to shareholders’ equity as an alternative form of dividends upon approval of our board of directors.
Dividend Preference of Preferred Shares
Under our by-laws, our
preferred shareholders are entitled to a minimum annual non-cumulative preferential dividend, or the Minimum Preferred Dividend, equal to the greater of (1) 6.0% per year of their
pro rata
share of our capital, or
(2) 3.0% per year of the book value of our shareholders’ equity divided by our total number of shares, before dividends may be paid to our common shareholders. Distributions of dividends in any year are made:
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first, to the holders of preferred shares, up to the amount of the Minimum Preferred Dividend for such year;
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•
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then, to the holders of common shares, until the amount distributed in respect of each common share is equal to the amount distributed in respect of
each preferred share; and
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•
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thereafter, to the common and preferred shareholders on a pro rata basis.
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If the Minimum Preferred Dividend is not paid for a period of three years, holders of preferred shares shall be entitled to full voting
rights.
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PART SIX—SHAREHOLDER RIGHTS
Payment of Dividends and Interest Attributable to Shareholders’
Equity
We may pay the mandatory distributable amount as dividends or as interest attributable to shareholders’
equity, which is similar to a dividend but is deductible in calculating our income tax obligations.
Because our shares are
issued in book-entry form, dividends with respect to any share are automatically credited to the account holding such share. Shareholders who are not residents of Brazil must register with the Brazilian Central Bank in order for dividends, sales
proceeds or other amounts with respect to their shares to be eligible to be remitted outside of Brazil.
The common and
preferred shares underlying Brasil Telecom ADSs are held in Brazil by the depositary, which has registered with the Brazilian Central Bank as the registered owner of our common and preferred shares. Payments of cash dividends and distributions, if
any, will be made in Brazilian currency to the depositary. The depositary will then convert such proceeds into dollars and will cause such dollars to be distributed to holders of Brasil Telecom ADSs. As with other types of remittances from Brazil,
the Brazilian government may impose temporary restrictions on remittances to foreign investors of the proceeds of their investments in Brazil, as it did for approximately six months in 1989 and early 1999, and on the conversion of Brazilian currency
into foreign currencies, which could hinder or prevent the depositary from converting dividends into U.S. dollars and remitting these U.S. dollars abroad. “—Description of Brasil Telecom ADSs—Dividends and Other Distributions.”
Dividends
We are required by the Brazilian Corporation Law and by our by-laws to hold an annual shareholders’ meeting by April 30 of each
year. At our annual shareholders’ meeting, our common shareholders may vote to declare an annual dividend. Our payment of annual dividends is based on our audited financial statements prepared for our preceding fiscal year.
Any holder of record of shares at the time that a dividend is declared is entitled to receive dividends. Under the Brazilian Corporation
Law, we are generally required to pay dividends within 60 days after declaring them, unless the shareholders’ resolution establishes another payment date, which, in any case, must occur prior to the end of the fiscal year in which the dividend
is declared.
Our board of directors may declare interim dividends based on the accrued profits recorded or the realized
profits in our annual or semi-annual financial statements approved by our common shareholders. In addition, we may pay dividends from net income based on our unaudited quarterly financial statements. We may set off any payment of interim dividends
against the amount of the mandatory distributable amount for the year in which the interim dividends were paid.
Interest Attributable to
Shareholders’ Equity
Brazilian companies, including our company, are permitted to pay interest attributable to
shareholders’ equity as an alternative form of payment of dividends to our shareholders. These payments may be deducted when calculating Brazilian income tax and social contribution tax. The interest rate applied to these distributions
generally cannot exceed the Long-Term Interest Rate for the applicable period. The amount of interest paid that we can deduct for tax purposes cannot exceed the greater of:
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50% of our net income (after the deduction of the provision for social contribution tax and before the deduction of the provision for corporate income
tax) before taking into account any such distribution for the period for which the payment is made; and
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50% of the sum of our retained earnings and income reserves.
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151
PART SIX—SHAREHOLDER RIGHTS
Any payment of interest attributable to shareholders’
equity to holders of our common shares or preferred shares or Brasil Telecom ADSs, whether or not they are Brazilian residents, is subject to Brazilian withholding tax at the rate of 15%, except that a 25% withholding tax rate applies if the
recipient is a resident of a tax haven jurisdiction. A tax haven jurisdiction is a country (1) that does not impose income tax or whose income tax rate is lower than 20%, or (2) which does not permit disclosure of the identity of
shareholders of entities organized under its jurisdiction. See “Part Five—The Merger—Material Tax Considerations—Brazilian Tax Considerations—Taxation of Gains.” Under our by-laws, we may include the amount distributed
as interest attributable to shareholders’ equity, net of any withholding tax, as part of the mandatory distributable amount.
Prescription of Payments
Our shareholders have three years to claim dividend distributions made with respect to their shares, as from the date that we distribute the dividends to our shareholders, after which any unclaimed
dividend distributions legally revert to us. We are not required to adjust the amount of any distributions for inflation that occurs during the period from the date of declaration to the payment date.
Shareholders’ Meetings
Under the Brazilian Corporation Law, we must hold an annual shareholders’ meeting by April 30 of each year in order to:
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approve or reject the financial statements approved by our board of directors and board of executive officers, including any recommendation by our
board of directors for the allocation of net profit and distribution of dividends;
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elect members of our board of directors (upon expiration of their three-year terms) and members of our fiscal council, subject to the right of minority
shareholders to elect members of our board of directors and our fiscal council; and
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approve any monetary adjustment to our share capital.
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In addition to the annual shareholders’ meetings, holders of our common shares have the power to determine any matters related to changes in our corporate purposes and to pass any resolutions they
deem necessary to protect and enhance our development whenever our interests so require, by means of extraordinary shareholders’ meetings.
We convene our shareholders’ meetings, including our annual shareholders’ meeting, by publishing a notice in the national edition of
Valor Econômico,
a Brazilian newspaper, and in
the Official Gazette of the state of Rio de Janeiro (
Diário Oficial do Estado do Rio de Janeiro
). On the first call of any meeting, the notice must be published no fewer than three times, beginning at least 15 calendar days prior to
the scheduled meeting date. For meetings involving the issuance of securities or deliberations where preferred shareholders are entitled to vote, the notice must be published at least 30 calendar days prior to the scheduled meeting date. The notice
must contain the meeting’s place, date, time, agenda and, in the case of a proposed amendment to our by-laws, a description of the subject matter of the proposed amendment.
Our board of directors may convene a shareholders’ meeting. Under the Brazilian Corporation Law, shareholders’ meetings also
may be convened by our shareholders as follows:
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by any of our shareholders if, under certain circumstances set forth in the Brazilian Corporation Law, our directors do not convene a
shareholders’ meeting within 60 days;
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152
PART SIX—SHAREHOLDER RIGHTS
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by shareholders holding at least 5% of our total share capital if, after a period of eight days, our directors fail to call a shareholders’
meeting that has been requested by such shareholders; and
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by shareholders holding at least 5% of either our total voting share capital or our total non-voting share capital, if after a period of eight days,
our directors fail to call a shareholders’ meeting for the purpose of appointing a fiscal council that has been requested by such shareholders.
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In addition, our fiscal council may convene a shareholders’ meeting if our board of directors does not convene an annual shareholders’ meeting within 30 days or at any other time to consider any
urgent and serious matters.
Each shareholders’ meeting is presided over by the chief executive officer, who is
responsible for choosing a secretary of the meeting. A shareholder may be represented at a shareholders’ meeting by an attorney-in-fact appointed by the shareholder not more than one year before the meeting. The attorney-in-fact must be a
shareholder, a member of our board of directors, a lawyer or a financial institution, and the power of attorney appointing the attorney-in-fact must comply with certain formalities set forth under Brazilian law. To be admitted to a
shareholders’ meeting, a person must produce proof of his or her shareholder status or a valid power of attorney.
In
order for a valid action to be taken at a shareholders’ meeting, shareholders representing at least 25% of our issued and outstanding voting share capital must be present on first call. However, shareholders representing at least two-thirds of
our issued and outstanding voting share capital must be present at a shareholders’ meeting called to amend our by-laws. If a quorum is not present, our board of directors may issue a second call by publishing a notice as described above at
least eight calendar days prior to the scheduled meeting. The quorum requirements do not apply to a meeting held on the second call, and the shareholders’ meetings may be convened with the presence of shareholders representing any number of
shares (subject to the voting requirements for certain matters described below). A shareholder without a right to vote may attend a shareholders’ meeting and take part in the discussion of matters submitted for consideration.
Voting Rights
Under the Brazilian Corporation Law and our by-laws, each of our common shares entitles its holder to one vote at our shareholders’ meetings. Our preferred shares generally do not confer voting
rights, except in limited circumstances described below. We may not restrain or deny any voting rights without the consent of the majority of the shares affected. Whenever the shares of any class of share capital are entitled to vote, each share is
entitled to one vote.
Voting Rights of Common Shares
Except as otherwise provided by law, resolutions of a shareholders’ meeting are passed by a simple majority vote of the holders of our common shares present or represented at the meeting, without
taking abstentions into account. Under the Brazilian Corporation Law, the approval of shareholders representing at least a majority of our outstanding voting shares is required for the types of action described below:
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creating preferred shares or disproportionately increasing an existing class of our preferred shares relative to the other classes of our preferred
shares, other than to the extent permitted by our by-laws;
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changing a priority, preference, right, privilege or condition of redemption or amortization of any class of our preferred shares or creating a new
class of preferred shares that has a priority, preference, right, condition or redemption or amortization superior to an existing class of our preferred shares;
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reducing the mandatory dividend set forth in our by-laws;
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changing our corporate purpose;
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153
PART SIX—SHAREHOLDER RIGHTS
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merging our company with another company, or consolidating our company, subject to the conditions set forth in the Brazilian Corporation Law;
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transferring all of our shares to another company, known as an “
incorporação de ações
” under the Brazilian
Corporation Law;
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participating in a centralized group of companies (
grupo de sociedades
) as defined under the Brazilian Corporation Law and subject to the
conditions set forth in the Brazilian Corporation Law;
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dissolving or liquidating our company or canceling any ongoing liquidation of our company;
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creating any founders’ shares (
partes beneficiárias
) entitling the holders thereof to participate in the profits of our company; and
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spinning-off of all or any part of our company.
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In addition, extraordinary meetings called to decide on these matters must be called at least 30 days in advance of the scheduled meeting date.
Decisions on the transformation of our company into another form of company require the unanimous approval of our shareholders, including
the holders of our preferred shares.
Our company is required to give effect to shareholders agreements that contain
provisions regarding the purchase or sale of our shares, preemptive rights to acquire our shares, the exercise of the right to vote our shares or the power to control our company, if these agreements are filed with our headquarters in Rio de
Janeiro. Brazilian Corporation Law obligates the president of any shareholder or board of directors meeting to disregard any vote taken by any of the parties to any shareholders agreement that has been duly filed with our company that violates the
provisions of any such agreement. In the event that a shareholder that is party to a shareholders agreement (or a director appointed by such shareholder) is absent from any shareholders’ or board of directors’ meeting or abstains from
voting, the other party or parties to that shareholders agreement have the right to vote the shares of the absent or abstaining shareholder (or on behalf of the absent director) in compliance with that shareholders agreement.
Under the Brazilian Corporation Law, neither our by-laws nor actions taken at a shareholders’ meeting may deprive any of our
shareholders of certain specific rights, including:
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the right to participate in the distribution of our profits;
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the right to participate in any remaining residual assets in the event of our liquidation;
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the right to supervise the management of our corporate business as specified in the Brazilian Corporation Law;
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the right to preemptive rights in the event of an issuance of our shares, debentures convertible into our shares or subscription bonuses, other than
with respect to a public offering of our securities; and
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the right to withdraw from our company under the circumstances specified in the Brazilian Corporation Law.
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Voting Rights of Minority Shareholders
Shareholders holding shares representing not less than 10% of our shares entitled to vote at our shareholders’ meeting have the right to request that we adopt a cumulative voting procedure. If the
cumulative voting procedure is adopted, our controlling shareholders always retain the right to elect at least one member more than the number of members elected by the other shareholders, regardless of the total number of members of our board of
directors. This procedure must be requested by the required number of shareholders at least 48 hours prior to a shareholders’ meeting.
154
PART SIX—SHAREHOLDER RIGHTS
Under the Brazilian Corporation Law, shareholders that are
not controlling shareholders, but that together hold either:
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non-voting preferred shares representing at least 10% of our total share capital; or
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common shares representing at least 15% of our voting capital,
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have the right to appoint one member and an alternate to our board of directors at our annual shareholders’ meeting. If no group of our common or preferred shareholders meets the thresholds described
above, shareholders holding preferred shares or common shares representing at least 10% of our total share capital are entitled to combine their holdings to appoint one member and an alternate to our board of directors. In the event that minority
holders of common shares and/or holders of non-voting preferred shares elect a director and the cumulative voting procedures described above are also used, our controlling shareholders always retain the right to elect at least one member more than
the number of members elected by the other shareholders, regardless of the total number of members of our board of directors. The shareholders seeking to exercise these minority rights must prove that they have held their shares for not less than
three months preceding the shareholders’ meeting at which the director will be appointed. Any directors appointed by the non-controlling shareholders have the right to veto for cause the selection of our independent registered public accounting
firm.
In accordance with the Brazilian Corporation Law, the holders of preferred shares without voting rights or with
restricted voting rights are entitled to elect one member and an alternate to our fiscal council in a separate election. Minority shareholders have the same right as long as they jointly represent 10% or more of the voting shares. The other
shareholders with the right to vote may elect the remaining members and alternates, who, in any event, must number more than the directors and alternates elected by the holders of the non-voting preferred shares and the minority shareholders.
Voting Rights of Preferred Shares
Holders of our preferred shares are not entitled to vote on any matter, except (1) with respect to the election of a member of our board of directors by preferred shareholders holding at least 10% of
our total share capital as described above, (2) with respect to the election of a member and alternate member of our fiscal council as described above, and (3) in the limited circumstances described below.
The Brazilian Corporation Law and our by-laws provide that our preferred shares will acquire unrestricted voting rights after the third
consecutive fiscal year that we fail to pay the minimum dividends to which our preferred shares are entitled. This voting right will continue until the past due minimum dividend for any year in that three consecutive-year period is paid in full. Our
preferred shareholders will also obtain unrestricted voting rights if we enter into a liquidation process.
Under the
Brazilian Corporation Law, the following actions require ratification by the majority of issued and outstanding shares of the affected class within one year from the shareholders’ meeting at which the common shareholders approve the action:
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the creation of preferred shares or a disproportionate increase of an existing class of our preferred shares relative to the other classes of our
preferred shares, other than to the extent permitted by our by-laws;
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a change of a priority, preference, right, privilege or condition of redemption or amortization of any class of our preferred shares; or
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the creation of a new class of preferred shares that has a priority, preference, right, condition or redemption or amortization superior to an existing
class of our preferred shares.
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155
PART SIX—SHAREHOLDER RIGHTS
Liquidation
We may be liquidated in accordance with the provisions of Brazilian law. In the event of our extrajudicial liquidation, a
shareholders’ meeting will determine the manner of our liquidation, appoint our liquidator and our fiscal council that will function during the liquidation period.
Upon our liquidation, our preferred shares do not have a liquidation preference over our common shares in respect of the distribution of our net assets. In the event of our liquidation, the assets
available for distribution to our shareholders would be distributed to our shareholders in an amount equal to their
pro rata
share of our legal capital. If the assets to be so distributed are insufficient to fully compensate our all of our
shareholders for their legal capital, each of our shareholders would receive a
pro rata
amount (based on their
pro rata
share of our legal capital) of any assets available for distribution.
Preemptive Rights
Under the Brazilian Corporation Law, each of our shareholders has a general preemptive right to subscribe for our shares or securities convertible into our shares in any capital increase, in proportion to
the number of our shares held by such shareholder.
Under our by-laws, except when issuing voting shares or securities
convertible into voting shares, our board of directors or our shareholders, as the case may be, may decide not to extend preemptive rights to our shareholders with respect to any issuance of our shares, debentures convertible into our shares or
warrants made in connection with a public exchange made to acquire control of another company or in connection with a public offering or through a stock exchange. The preemptive rights are transferable and must be exercised within a period of at
least 30 days following the publication of notice of the issuance of shares or securities convertible into our shares. Holders of Brasil Telecom ADSs may not be able to exercise the preemptive rights relating to our preferred shares underlying their
ADSs unless a registration statement under the Securities Act is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with
respect to the shares relating to these preemptive rights or to take any other action to make preemptive rights available to holders of Brasil Telecom ADSs, and we may not file any such registration statement.
Redemption, Amortization, Tender Offers and Rights of Withdrawal
Our by-laws or our shareholders at a shareholders’ meeting may authorize us to use our profits or reserves to redeem or amortize our
shares in accordance with conditions and procedures established for such redemption or amortization. The Brazilian Corporation Law defines “redemption” (
resgate de ações
) as the payment of the value of the shares in
order to permanently remove such shares from circulation, with or without a corresponding reduction of our share capital. The Brazilian Corporation Law defines “amortization” (
amortização
) as the distribution to the
shareholders, without a corresponding capital reduction, of amounts that they would otherwise receive if we were liquidated. If an amortization distribution has been paid prior to our liquidation, then upon our liquidation, the shareholders who did
not receive an amortization distribution will have a preference equal to the amount of the amortization distribution in the distribution of our capital.
The Brazilian Corporation Law authorizes us to redeem shares not held by our controlling shareholders, if, after a tender offer effected as a consequence of delisting or a substantial reduction in the
liquidity of our shares, our controlling shareholders increase their participation in our total share capital to more than 95%. The redemption price in such case would be the same price paid for our shares in any such tender offer.
The Brazilian Corporation Law and our by-laws also require the acquirer of control (in case of a change of control) or the controller (in
case of delisting or a substantial reduction in liquidity of our shares) to make a
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tender offer for the acquisition of the shares held by minority shareholders under certain circumstances described below under “—Mandatory Tender Offers.” The shareholder can also
withdraw its capital from our company under certain circumstances described below under “—Rights of Withdrawal.”
Mandatory Tender Offers
The Brazilian Corporation Law requires that if our common shares are delisted from the BM&FBOVESPA or there is a substantial reduction in liquidity of our common shares, as defined by the CVM, in each
case as a result of purchases by our controlling shareholders, our controlling shareholders must effect a tender offer for acquisition of our remaining common shares at a purchase price equal to the fair value of our common shares taking into
account the total number of our outstanding common shares.
If our controlling shareholders enter into a transaction which
results in a change of control of our company, the controlling shareholders must include in the documentation of the transaction an obligation to effect a public offer for the purchase of all our common shares for at least 80% of the price per share
paid to the controlling shareholders. The tender offer must be submitted to the CVM within 30 days from the date of execution of the documents that provide for the change of control.
Rights of Withdrawal
The Brazilian Corporation Law provides that,
in certain limited circumstances, a dissenting shareholder may withdraw its equity interest from our company and be reimbursed by us for the value of our common or preferred shares that it then holds.
This right of withdrawal may be exercised by the dissenting or non-voting holders of the adversely affected class of shares (including
any holder of preferred shares of an adversely affected class) in the event that the holders of a majority of all outstanding common shares authorize:
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the creation of preferred shares or a disproportionate increase of an existing class of our preferred shares relative to the other classes of our
preferred shares, other than to the extent permitted by our by-laws;
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a change of a priority, preference, right, privilege or condition of redemption or amortization of any class of our preferred shares; or
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the creation of a new class of preferred shares that has a priority, preference, right, condition or redemption or amortization superior to an existing
class of our preferred shares.
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In addition, this right of withdrawal may be exercised by any dissenting or
non-voting shareholder (including any holder of preferred shares) in the event that the holders of a majority of the outstanding common shares authorize:
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a reduction of the mandatory dividend set forth in our by-laws;
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our participation in a centralized group of companies;
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a change in our corporate purpose;
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spinning-off of all or any part of our company, if such spin-off implies (1) a change in our business purpose (except if the spun-off assets
revert to a company whose main purpose is the same as ours), (2) a reduction of the mandatory dividend set forth in our by-laws, or (3) our participation in a centralized group of companies; or
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in one of the following transactions in which the shares held by such holders do not meet liquidity and dispersion thresholds under the Brazilian
Corporation Law:
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the merger of our company with another company, or the consolidation of our company, in a transaction in which our company is not the surviving entity;
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the transfer of all of our outstanding shares to another company in an
incorporação de ações
transaction;
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the transfer of all of the outstanding shares of another company to us in an
incorporação de ações
transaction; or
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the acquisition of control of another company at a price that exceeds certain limits set forth in the Brazilian Corporation Law.
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Dissenting or non-voting shareholders are also entitled to withdraw in the event that the entity resulting
from a merger or spin-off does not have its shares listed in an exchange or traded in the secondary market within 120 days from the shareholders’ meeting that approved the relevant merger or spin-off.
Notwithstanding the above, in the event that we are consolidated or merged with another company, become part of a centralized group of
companies
,
or acquire the control of another company for a price in excess of certain limits imposed by the Brazilian Corporation Law, holders of any type or class of our shares or the shares of the resulting entity that have minimal market
liquidity and are dispersed among a sufficient number of shareholders will not have the right to withdraw. For this purpose, shares that are part of general indices representative of portfolios of securities traded in Brazil or abroad are considered
liquid, and sufficient dispersion will exist if the controlling shareholder, the parent company or other companies under its control hold less than half of the total number of outstanding shares of that type or class. In case of a spin-off, the
right of withdrawal will only exist if there is a significant change in the corporate purpose or a reduction in the mandatory dividend.
Only shareholders who own shares on the date of publication of the first notice convening the relevant shareholders’ meeting or the press release concerning the relevant transaction is published,
whichever is earlier, will be entitled to withdrawal rights.
The redemption of shares arising out of the exercise of any
withdrawal rights would be made at the economic value of the shares, generally equal to the book value per share, determined on the basis of our most recent audited balance sheet approved by our shareholders. The economic value of the shares may be
lower than the net book value amount if it is based on the economic value of the enterprise, as determined by an appraisal process in accordance with Brazilian Corporation Law. If the shareholders’ meeting approving the action that gave rise to
withdrawal rights occurred more than 60 days after the date of the most recent approved audited balance sheet, a shareholder may demand that its shares be valued on the basis of a balance sheet prepared specifically for this purpose.
The right of withdrawal lapses 30 days after the date of publication of the minutes of the shareholders’ meeting that approved the
action that gave rise to withdrawal rights, except when the resolution is approved pending confirmation by the holders of our preferred shares (such confirmation to be given at an extraordinary meeting of such preferred shareholders to be held
within one year). In this event, the 30-day period for dissenting shareholders begins at the date of publication of the minutes of the extraordinary meeting of such preferred shareholders. Our shareholders may reconsider any resolution giving rise
to withdrawal rights within 10 days after the expiration of the exercise period of withdrawal rights if we believe that the withdrawal of shares of dissenting shareholders would jeopardize our financial stability.
Liability of Our Shareholders for Further Capital Calls
Neither Brazilian law nor our by-laws require any capital calls. Our shareholders’ liability for capital calls is limited to the
payment of the issue price of any shares subscribed or acquired.
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PART SIX—SHAREHOLDER RIGHTS
Inspection of Corporate Records
Shareholders that own 5% or more of our outstanding share capital have the right to inspect our corporate records,
including shareholders’ lists, corporate minutes, financial records and other documents of our company, if (1) we or any of our officers or directors have committed any act contrary to Brazilian law or our by-laws, or (2) there are
grounds to suspect that there are material irregularities in our company. However, in either case, the shareholder that desires to inspect our corporate records must obtain a court order authorizing the inspection.
Disclosures of Share Ownership
Brazilian regulations require that (1) each of our controlling shareholders, directly or indirectly, (2) shareholders who have elected members of our board of directors or fiscal council,
and (3) any person or group of persons representing a person that has directly or indirectly acquired or sold an interest corresponding to at least 5% of the total number of our shares of any type or class to disclose its or their share
ownership or divestment to the CVM and to the BM&FBOVESPA. In addition, a statement (
fato relevante
) containing certain required information must be published in the national edition of
Valor Econômico
, a Brazilian newspaper,
and in the Official Gazette of the state of Rio de Janeiro (
Diário Oficial do Estado do Rio de Janeiro
).
Our controlling shareholders, shareholders that appoint members of our board of directors or fiscal council and members of our board of
directors, board of executive officers or fiscal council must file a statement of any change in their holdings of our shares with the CVM and the Brazilian stock exchanges on which our securities are traded.
Form and Transfer
Our preferred shares and common shares are in book-entry form, registered in the name of each shareholder or its nominee. The transfer of our shares is governed by Article 35 of the Brazilian Corporation
Law, which provides that a transfer of shares is effected by our transfer agent, Banco Bradesco S.A., by an entry made by the transfer agent in its books, upon presentation of valid written share transfer instructions to us by a transferor or its
representative. When preferred shares or common shares are acquired or sold on a Brazilian stock exchange, the transfer is effected on the records of our transfer agent by a representative of a brokerage firm or the stock exchange’s clearing
system. The transfer agent also performs all the services of safe-keeping of our shares. Transfers of our shares by a non-Brazilian investor are made in the same manner and are executed on the investor’s behalf by the investor’s local
agent. If the original investment was registered with the Central Bank pursuant to foreign investment regulations, the non-Brazilian investor is also required to amend, if necessary, through its local agent, the electronic certificate of
registration to reflect the new ownership.
The BM&FBOVESPA operates a central clearing system. A holder of our shares may
choose, at its discretion, to participate in this system, and all shares that such shareholder elects to be put into the clearing system are deposited in custody with the clearing and settlement chamber of the BM&FBOVESPA (through a Brazilian
institution that is duly authorized to operate by the Central Bank and maintains a clearing account with the clearing and settlement chamber of the BM&FBOVESPA). Shares subject to the custody of the clearing and settlement chamber of the
BM&FBOVESPA are noted as such in our registry of shareholders. Each participating shareholder will, in turn, be registered in the register of the clearing and settlement chamber of the BM&FBOVESPA and will be treated in the same manner as
shareholders registered in our books.
Description of Brasil Telecom ADSs
The following is a summary of the material provisions of the deposit agreements among Brasil Telecom, The Bank of New York Mellon,
referred to in this section as the depositary, and the registered holders and other
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holders from time to time of Brasil Telecom ADSs, pursuant to which the Brasil Telecom Common ADSs, and Brasil Telecom Preferred ADSs, are to be issued. This summary is subject to and qualified
in its entirety by reference to the deposit agreements, including the form of ADRs attached thereto. The deposit agreements are exhibits to this registration statement of which this prospectus is a part. Copies of the deposit agreements are
available for inspection at the corporate trust office of the depositary, currently located at 101 Barclay Street, New York, New York 10286, and at the office of the custodian, currently located at Rua Ururaí, 111, Prédio B, Piso
Térreo, Tatuapé, 03084-101, São Paulo, SP Brazil. The depositary’s principal executive office is located at One Wall Street, New York, New York 10286.
Brasil Telecom American Depositary Shares
The
Bank of New York Mellon, as depositary, will register and deliver American Depositary Shares, also referred to as ADSs. Each Brasil Telecom Preferred ADS represents three Brasil Telecom preferred shares (or a right to receive three shares), and each
Brasil Telecom Common ADS represents one Brasil Telecom common share (or a right to receive one share), deposited with the principal São Paulo office of Itaú Unibanco S.A., as custodian for the depositary. Each ADS will also represent
any other securities, cash or other property which may be held by the depositary under the applicable deposit agreement.
You
may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (ii) by having ADSs registered in
your name in the Direct Registration System, or DRS, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution. If you hold ADSs directly, you are a registered ADS holder, also referred to as
an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should
consult with your broker or financial institution to find out what those procedures are.
DRS is a system administered by The
Depository Trust Company, also referred to as DTC, pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements sent by the depositary to the registered holders of
uncertificated ADSs.
As an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder
rights. Brazilian law governs shareholder rights. The depositary will be the holder of the shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A deposit agreement among us, the depositary and you, as an ADS
holder, and all other persons indirectly holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.
The following is a summary of the material provisions of the deposit agreements. For more complete information, you should read the
entire deposit agreement and the form of ADR relating to the Brasil Telecom Preferred ADSs or the Brasil Telecom Common ADSs, as applicable. Directions on how to obtain copies of those documents are provided on under “Incorporation by
Reference.”
Dividends and Other Distributions
How will you receive dividends and other distributions on the shares?
The depositary has agreed to pay to ADS holders the cash dividends or other distributions it or the custodian receives on Brasil Telecom
common shares or preferred shares or other deposited securities, after deducting its
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PART SIX—SHAREHOLDER RIGHTS
fees and expenses. You will receive these distributions in proportion to the number of shares your ADSs represent.
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Cash
. The depositary will convert any cash dividend or other cash distribution we pay on the shares into U.S. dollars, if it can do so on
a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval is needed and cannot be obtained, the deposit agreements allow the depositary to distribute the foreign currency only to
those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.
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Before making a distribution, any withholding taxes, or other governmental charges that must be paid will be
deducted. See “Part Five—The Merger—Material Tax Considerations.” It will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent.
If the exchange rates fluctuate during a time
when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution.
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Shares
.
The depositary may distribute additional ADSs representing any shares we distribute as a dividend or free distribution.
The depositary will only distribute whole ADSs. It will sell shares which would require it to deliver a fractional ADS and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the
outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed shares sufficient to pay its fees and expenses in connection with that distribution.
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Rights to purchase additional shares
.
If we offer holders of our securities any rights to subscribe for additional shares or any
other rights, the depositary may make these rights available to ADS holders. If the depositary decides it is not legal and practical to make the rights available but that it is practical to sell the rights, the depositary will use reasonable efforts
to sell the rights and distribute the proceeds in the same way as it does with cash. The depositary will allow rights that are not distributed or sold to lapse.
In that case, you will receive no value for them.
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If the depositary makes rights available to ADS holders, it will exercise the rights and purchase the shares on your behalf. The
depositary will then deposit the shares and deliver ADSs to the persons entitled to them. It will only exercise rights if you pay it the exercise price and any other charges the rights require you to pay.
U.S. securities laws may restrict transfers and cancellation of the ADSs represented by shares purchased upon exercise of rights. For
example, you may not be able to trade these ADSs freely in the United States. In this case, the depositary may deliver restricted depositary shares that have the same terms as the ADSs described in this section except for changes needed to put the
necessary restrictions in place.
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Other Distributions
.
The depositary will send to ADS holders anything else we distribute on deposited securities by any means it
thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to
hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us
that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution.
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The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders.
We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares,
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PART SIX—SHAREHOLDER RIGHTS
rights or anything else to ADS holders.
This means that you may not receive the distributions we make on our shares or any value for them if it is illegal or impractical for us to make them
available to you
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Deposit, Withdrawal and Cancellation
How are ADSs issued?
The depositary will deliver ADSs if you or your broker deposits shares or evidence of rights to receive shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such
as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons that made the deposit.
How can ADS holders withdraw the deposited securities?
You may surrender your ADSs at the depositary’s corporate trust office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the
depositary will deliver the shares and any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver
the deposited securities at its corporate trust office, if feasible.
ADS holders have the right to cancel their ADSs and
withdraw the underlying shares at any time except:
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when temporary delays arise because: (1) the depositary has closed its transfer books or we have closed our transfer books; (2) the transfer
of shares is blocked to permit voting at a shareholders’ meeting; or (3) we are paying a dividend on our shares;
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when you owe money to pay fees, taxes and similar charges; and
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when it is necessary to prohibit withdrawals in order to comply with any U.S. or foreign laws or governmental regulations that apply to ADSs or to the
withdrawal of shares or other deposited securities.
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This right of withdrawal may not be limited by any
other provision of the deposit agreement.
How do ADS holders interchange between certificated ADSs and uncertificated ADSs?
You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The
depositary will cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs.
Upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and
deliver to the ADS holder an ADR evidencing those ADSs.
Voting Rights
How do you vote?
Our common shares entitle their holders to vote on all matters presented to a vote of shareholders of Brasil Telecom as set forth under
“—Description of Brasil Telecom Capital Stock—Voting Rights—Voting Rights of Common Shares.” Our preferred shares presently do not entitle their holders to vote on any matter presented to a vote of shareholders of Brasil
Telecom except as set forth under “—Description of Brasil Telecom Capital Stock—Voting Rights—Voting Rights of Preferred Shares.”
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ADS holders eligible to vote may instruct the depositary to
vote the number of deposited shares their ADSs represent. The depositary will notify ADS holders of shareholders’ meetings and arrange to deliver our voting materials to them if we ask it to. Those materials will describe the matters to be
voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary.
Otherwise, you won’t be able to exercise your right to vote unless you withdraw the shares. However, you may not know about the meeting enough in advance to withdraw the shares.
The depositary will try, as far as practical, subject to the laws of Brazil and of our bylaws, to vote or to have its agents vote the
shares or other deposited securities as instructed by ADS holders. The depositary will only vote or attempt to vote as instructed.
We can not assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible
for failing to carry out voting instructions or for the manner of carrying out voting instructions.
This means that you may not be able to exercise your right to vote and there may be nothing you can do if your shares are not voted as you
requested.
In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights
relating to deposited securities, if we request the depositary to act, we agree to give the depositary notice of any such meeting and details concerning the matters to be voted upon at least 30 days in advance of the meeting date.
Fees and Expenses
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Persons depositing or withdrawing shares or ADS holders must pay to the depositary:
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For:
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$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
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• Issuance of ADSs, including issuances resulting from a
distribution of shares or rights or other property
• Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
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$.02 (or less) per ADS
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• Any cash distribution to ADS holders
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A fee equivalent to the fee that would be payable if securities distributed to you had been Brasil Telecom shares and the Brasil Telecom
shares had been deposited for issuance of ADSs
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• Distribution of securities distributed to holders of deposited securities which are distributed by
the depositary to ADS holders
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$.02 (or less) per ADSs per calendar year
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• Depositary services
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Registration or transfer fees
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• Transfer and registration of shares on our share register to or
from the name of the depositary or its agent when you deposit or withdraw shares
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Expenses of the depositary
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• Cable, telex and facsimile transmissions (when expressly provided
in the deposit agreement)
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• converting foreign currency to U.S. dollars
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Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding
taxes
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• As necessary
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Any charges incurred by the depositary or its agents for servicing the deposited securities
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• As necessary
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Payment of Taxes
You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any
of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until such taxes or other charges are paid. The depositary may apply payments owed to you or
sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities represented by your ADSs, it will, if appropriate, reduce the number of ADSs held by
you to reflect the sale and pay to you any proceeds, or send to you any property, remaining after it has paid the taxes.
Reclassifications, Recapitalizations and Mergers
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If we:
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Then:
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• Change the nominal or par value of our shares
• Reclassify,
split up or consolidate any of the deposited securities
• Distribute securities on the shares that are not distributed to you
• Recapitalize, reorganize, merge, liquidate, sell all or substantially all of our
assets, or take any similar action
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The cash, shares or other securities received by the depositary will become deposited securities. Each ADS will automatically represent
its equal share of the new deposited securities.
The depositary may, and
will if we ask it to, distribute some or all of the cash, shares or other securities it received. It may also deliver new ADRs or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited
securities.
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Amendment and Termination
How may the deposit agreement be amended?
We may agree with the
depositary to amend the deposit agreements and the ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees,
facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment.
At the time an
amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended
.
How may the deposit agreement be terminated?
The depositary will
terminate either deposit agreement at our direction by mailing notice of termination to the applicable ADS holders then outstanding at least 30 days prior to the date fixed in such notice for such termination. The depositary may also terminate
either deposit agreement by mailing notice of termination to us and the applicable ADS holders if 60 days have passed since the depositary told us it wants to resign but a successor depositary has not been appointed and accepted its appointment.
The depositary may terminate either deposit agreement on as little as 15 days’ notice if it believes it may be subject
to legal liability because we failed to provide information required by Brazilian government regulators.
After termination,
the depositary and its agents will do the following under the applicable deposit agreement but nothing else: collect distributions on the deposited securities, sell rights and other property, and deliver shares and other deposited securities upon
cancellation of ADSs. Four months after termination, the depositary may sell any remaining deposited securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as any other cash it is
holding under the deposit agreement for the pro rata benefit of
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the ADS holders that have not surrendered their ADSs. It will not invest the money and has no liability for interest. The depositary’s only obligations will be to account for the money and
other cash. After termination, our only obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.
Limitations on Obligations and Liability
Limits on our
Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs
The deposit agreement
expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:
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are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;
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are not liable if we are or it is prevented or delayed by law or circumstances beyond our control from performing our or its obligations under the
deposit agreement;
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are not liable if we or it exercises discretion permitted under the deposit agreement;
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are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders
of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;
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have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any
other person;
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may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person.
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In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the depositary will deliver or register a transfer of an ADS, make a distribution on an ADS, or permit withdrawal of shares, the depositary may require:
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payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of
any shares or other deposited securities;
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satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and
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compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.
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The depositary may refuse to deliver ADSs or register transfers of ADSs generally when the transfer books
of the depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.
Pre-release of ADSs
The deposit agreements permit the depositary to deliver ADSs before deposit of the underlying
shares. This is called a pre-release of the ADSs. The depositary may also deliver shares upon cancellation of pre-released ADSs (even if the ADSs are canceled before the pre-release transaction has been closed out). A pre-release is closed out as
soon as the underlying shares are delivered to the depositary. The depositary may receive ADSs instead of shares to close out a pre-release. The depositary may pre-release ADSs only under the following conditions: (1) before or at the time of
the pre-release, the person to whom the pre-release is being made
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PART SIX—SHAREHOLDER RIGHTS
represents to the depositary in writing that it or its customer owns the shares or ADSs to be deposited; (2) the pre-release is fully collateralized with cash or other collateral that the
depositary considers appropriate; and (3) the depositary must be able to close out the pre-release on not more than five business days’ notice. In addition, the depositary will limit the number of ADSs that may be outstanding at any time
as a result of pre-release, although the depositary may disregard the limit from time to time, if it thinks it is appropriate to do so.
Direct Registration System
In the deposit agreements, all parties to the deposit agreements acknowledge that the DRS
and Profile Modification System, or Profile, will apply to uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to which the depositary may register the ownership of uncertificated ADSs, which
ownership shall be evidenced by periodic statements sent by the depositary to the registered holders of uncertificated ADSs. Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of a registered holder of
ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register
that transfer.
In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties
to the deposit agreements understand that the depositary will not verify, determine or otherwise ascertain that the DTC participant which is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and delivery
described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreements, the parties agree that the depositary’s reliance on
and compliance with instructions received by the depositary through the DRS/Profile System and in accordance with the applicable deposit agreement, shall not constitute negligence or bad faith on the part of the depositary.
Shareholder Communications; Inspection of Register of Holders of ADSs
The depositary will make available for your inspection at its office all communications that it receives from us as a holder of deposited
securities that we make generally available to holders of deposited securities. The depositary will send you copies of those communications if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of
contacting those holders about a matter unrelated to our business or the ADSs.
Exchange
Controls
There are no restrictions on ownership or voting of our capital stock by individuals or legal entities domiciled
outside Brazil. However, the right to convert dividend payments, interest on shareholders’ equity payments and proceeds from the sale of our share capital into foreign currency and to remit such amounts outside Brazil is subject to restrictions
under foreign investment legislation and foreign exchange regulations, which generally require, among other things, the registration of the relevant investment with the Central Bank and the CVM.
Investments in common shares or preferred shares of Brasil Telecom by (1) a holder not deemed to be domiciled in Brazil for
Brazilian tax purposes, (2) a Non-Brazilian Holder who is registered with the CVM under Resolution No. 2,689, or (3) the depositary, are eligible for registration with the Central Bank. This registration (the amount so registered is
referred to as registered capital) allows the remittance outside Brazil of foreign currency, converted at the commercial market rate, acquired with the proceeds of distributions on, and amounts realized through, dispositions of common shares or
preferred shares of Brasil Telecom. As a general rule, the registered capital per common share or preferred share purchased in the form of an ADS, or purchased in Brazil
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PART SIX—SHAREHOLDER RIGHTS
and deposited with the depositary in exchange for an ADS, will be equal to the amount subject to the corresponding foreign exchange agreement for the original inflow of funds in Brazil or to the
amount subject to the applicable Symbolic FX Contract, as the case may be. The registered capital per common share withdrawn upon cancellation of a Brasil Telecom Common ADS will be the U.S. dollar equivalent of (1) the average price of a
common share on the BM&FBOVESPA on the day of withdrawal, or (2) if no common shares were traded on that day, the average price on the BM&FBOVESPA in the 15 trading sessions immediately preceding such withdrawal. The registered capital
per preferred share withdrawn upon cancellation of a Brasil Telecom Preferred ADS will be the U.S. dollar equivalent of (1) the average price of a preferred share on the BM&FBOVESPA on the day of withdrawal, or (2) if no preferred
shares were traded on that day, the average price on the BM&FBOVESPA in the 15 trading sessions immediately preceding such withdrawal. The U.S. dollar equivalent will be determined on the basis of the average commercial market rates quoted by
the Central Bank on the relevant dates.
Annex V Regulations
Resolution No. 1,927 of the National Monetary Council, as amended, provides for the issuance of depositary receipts in foreign
markets in respect of shares of Brazilian issuers. It restates and amends Annex V to Resolution No. 1,289 of the National Monetary Council, known as the Annex V Regulations. The ADS program was approved under the Annex V Regulations by the
Central Bank and the CVM prior to the issuance of the ADSs. Accordingly, the proceeds from the sale of ADSs by ADR holders outside Brazil are not subject to Brazilian foreign investment controls, and holders of the ADSs who are not resident in a
“tax haven” jurisdiction are entitled to favorable tax treatment. See “Part Five—The Merger—Material Tax Considerations—Brazilian Tax Considerations.”
We pay dividends and other cash distributions with respect to our common shares and preferred shares in
reais
. We have obtained an
electronic certificate of foreign capital registration from the Central Bank in the name of the depositary with respect to Brasil Telecom ADSs to be maintained by the custodian on behalf of the depositary. Pursuant to this registration, the
custodian is able to convert dividends and other distributions with respect to our common shares and preferred shares represented by ADSs into foreign currency and remit the proceeds outside Brazil to the depositary so that the depositary may
distribute these proceeds to the holders of record of the ADSs.
Investors residing outside Brazil may register their
investments in Brasil Telecom shares as foreign portfolio investments under Resolution No. 2,689 (described below) or as foreign direct investments under Law No. 4,131 (described below). Registration under Resolution No. 2,689 or Law
No. 4,131 generally enables Non-Brazilian Holders to convert dividends, other distributions and sales proceeds received in connection with registered investments into foreign currency and to remit such amounts outside Brazil. Registration under
Resolution No. 2,689 affords favorable tax treatment to Non-Brazilian Holders who are not resident in a Low or Nil Tax Jurisdiction, which is defined under Brazilian tax laws as a country that does not impose income taxes or where the maximum
income tax rate is 20% or less or that restricts the disclosure of shareholder composition, ownership of investments or of the identity of the ultimate beneficiary of earnings that are attributed to Non-Brazilian Holders. See “Part
Five—The Merger—Material Tax Considerations—Brazilian Tax Considerations.”
In the event that a holder of
Brasil Telecom ADSs exchanges those Brasil Telecom ADSs for the underlying common shares or preferred shares, the holder must:
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sell those shares on the BM&FBOVESPA and rely on the depositary’s electronic registration for five business days from the date of withdrawal
to obtain and remit U.S. dollars outside Brazil upon the holder’s sale of Brasil Telecom common shares or preferred shares, as applicable;
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167
PART SIX—SHAREHOLDER RIGHTS
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convert its investment in those shares into a foreign portfolio investment under Resolution No. 2,689; or
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convert its investment in those shares into a direct foreign investment under Law No. 4,131.
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The custodian is authorized to update the Brasil Telecom Depositary’s electronic registration to reflect conversions of Brasil
Telecom ADSs into foreign portfolio investments under Resolution 2,689, which requires the execution of an agreement relating to the simultaneous inflow of funds to and outflow of funds from Brazil without the actual transfer of funds, or a Symbolic
FX Contract.
A Symbolic FX Contract is also required if a holder of Brasil Telecom ADSs elects to convert its Brasil Telecom
ADSs into a foreign direct investment under Law No. 4,131. If a foreign direct investor under Law No. 4,131 elects to deposit its common shares or preferred shares into the applicable Brasil Telecom ADR program in exchange for Brasil
Telecom ADSs, such holder will be required to present to the custodian evidence of payment of applicable taxes. This conversion will be effected upon the execution of the relevant Symbolic FX Contract. See “Part Five—The
Merger—Material Tax Considerations—Brazilian Tax Considerations” for details of the tax consequences to an investor residing outside Brazil of investing in Brasil Telecom common shares or preferred shares in Brazil.
If a holder of Brasil Telecom ADSs wishes to convert its investment in common or preferred shares into either a foreign portfolio
investment under Resolution No. 2,689 or a foreign direct investment under Law No. 4,131, it should begin the process of obtaining its own foreign investor registration with the Central Bank or with the CVM, as the case may be, in advance
of exchanging the Brasil Telecom ADSs for the underlying common shares or preferred shares, as applicable. A Non-Brazilian Holder of common shares or preferred shares may experience delays in obtaining a foreign investor registration, which may
delay remittances outside Brazil, which may in turn adversely affect the amount, in U.S. dollars, received by the Non-Brazilian Holder.
Unless the holder has registered its investment with the Central Bank, the holder may not be able to convert the proceeds from the disposition of, or distributions with respect to, such common shares or
preferred shares into foreign currency or remit those proceeds outside Brazil. In addition, if the Non-Brazilian Holder resides in a “tax haven” jurisdiction or a Low or Nil Tax Jurisdiction, as the case may be, or is not an investor
registered under Resolution No. 2,689, the investor may be subject to less favorable tax treatment than a holder of ADSs. See “Part Five—The Merger—Material Tax Considerations—Brazilian Tax Considerations.”
Resolution 2,689
All investments made by a Non-Brazilian Holder under Resolution No. 2,689 are subject to an electronic registration with the Central Bank. This registration permits Non-Brazilian Holders to convert
dividend payments, interest on shareholders’ equity payments and proceeds from the sale of our share capital into foreign currency and to remit such amounts outside Brazil.
Under Resolution No. 2,689, Non-Brazilian Holders registered with the CVM may invest in almost all financial assets and engage in
almost all transactions available to Brazilian investors in the Brazilian financial and capital markets without obtaining a separate Central Bank registration for each transaction, provided that certain requirements are fulfilled. Under Resolution
No. 2,689, the definition of a Non-Brazilian Holder includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered outside Brazil.
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PART SIX—SHAREHOLDER RIGHTS
Pursuant to Resolution No. 2,689, Non-Brazilian Holders must:
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appoint at least one representative in Brazil with powers to take action relating to its investments;
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appoint an authorized custodian in Brazil for its investments, which must be a financial institution duly authorized by the Central Bank and CVM;
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complete the appropriate foreign investor registration forms;
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register as a Non-Brazilian Holder with the CVM;
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register its investments with the Central Bank; and
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obtain a taxpayer identification number from the Brazilian federal tax authorities.
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The securities and other financial assets held by a Non-Brazilian Holder pursuant to Resolution No. 2,689 must be registered or
maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM or be registered in registration, clearing and custody systems authorized by the Central Bank or by the CVM. In addition, the trading of
securities held under Resolution No. 2,689 is restricted to transactions carried out on stock exchanges or through organized over-the-counter markets licensed by the CVM.
The offshore transfer or assignment of the securities or other financial assets held by Non-Brazilian Holders pursuant to Resolution No. 2,689 are prohibited, except for transfers resulting from a
corporate reorganization effected abroad by a Non-Brazilian Holder, or occurring upon the death of an investor which requires the authorization of the CVM.
The conversion from an investment registered as “foreign direct investment” to an investment registered under the rules of Resolution No. 2,689, and vice versa require the execution of a
Symbolic FX Contract. See “Part Five—The Merger—Material Tax Considerations—Brazilian Tax Considerations.”
Law No. 4,131
To obtain a certificate of foreign capital registration from the Central Bank under Law
No. 4,131, a foreign direct investor must:
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register as a foreign direct investor with the Central Bank;
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obtain a taxpayer identification number from the Brazilian tax authorities;
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appoint a tax representative in Brazil; and
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appoint a representative in Brazil for service of process in respect of suits based on the Brazilian Corporation Law.
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Foreign direct investors under Law No. 4,131 may sell their shares in either private or open market transactions, but these
investors will generally be subject to less favorable tax treatment on gains with respect to common or preferred shares of Brasil Telecom. See “Part Five—The Merger—Material Tax Considerations—Brazilian Tax Considerations.”
169
PART SEVEN—ADDITIONAL INFORMATION FOR SHAREHOLDERS
W
here You Can Find More Information
We have filed with the SEC a registration statement on Form F-4 to register under the Securities Act (1) the common shares and
preferred shares of Brasil Telecom to be received in the merger by holders of common shares and preferred shares of TNL residing in the United States, and (2) the Brasil Telecom Common ADSs and Brasil Telecom Preferred ADSs to be received by
holders of TNL ADSs. This prospectus, which is part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits to the registration statement. For further information with respect
to Brasil Telecom and its common shares, preferred shares and ADSs, we refer you to the registration statement and the exhibits filed as a part of the registration statement.
Brasil Telecom and TNL file annual reports on Form 20-F and furnish reports on Form 6-K to the SEC under the rules and regulations that apply to foreign private issuers. As foreign private issuers, Brasil
Telecom, TNL and their respective shareholders are exempt from some of the reporting requirements of the Exchange Act, including the proxy solicitation rules, the rules regarding the furnishing of annual reports to stockholders and Section 16
short-swing profit reporting for their respective officers, directors and holders of more than 10% of their shares. You may read and copy any materials filed by Brasil Telecom and TNL with the SEC at its Public Reference Room at 100 F Street, N.E.,
Washington, D.C., 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website at http://www.sec.gov that contains reports and other information regarding issuers
that file electronically with the SEC.
Brasil Telecom and TNL are also subject to the informational requirements of the CVM
and the BM&FBOVESPA and file reports and other information relating to their respective businesses, financial condition and other matters with the CVM and the BM&FBOVESPA
.
You may read these reports, statements and other information
at the public reference facilities maintained by the CVM at Rua Sete de Setembro, 111, 2nd floor, Rio de Janeiro, RJ, Brazil, and Rua XV de Novembro, 275, Centro, São Paulo, SP, Brazil. Some filings of Brasil Telecom and TNL with the CVM and
the BM&FBOVESPA are also available at the website maintained by the CVM at http://www.cvm.gov.br and the website maintained by the BM&FBOVESPA at
http://www.bmfbovespa.com.br.
The public filings with the SEC and the CVM of
Brasil Telecom and TNL are also available to the public through our internet website at http://www.oi.net.br/ir. The information included on our websites or that might be accessed through our websites is not included in this prospectus or the
registration statement and is not incorporated into this prospectus or the registration statement by reference.
Enforceability of Civil Liabilities Under U.S. Securities Laws
Brasil Telecom is a corporation organized under the
laws of the Federative Republic of Brazil. All of the directors and executive officers of Brasil Telecom and some of the experts named in this prospectus reside in Brazil or elsewhere outside the United States. The vast majority of our assets are
located outside the United States and all or a substantial portion of the assets of these other persons may be located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States
upon Brasil Telecom or such other persons with respect to matters arising under the Securities Act or to enforce against them judgments of courts of the United States predicated upon the civil liability provisions of the Securities Act.
We have been advised by our Brazilian counsel, Barbosa, Müssnich & Aragão Advogados, that a judgment of a U.S. court
for the payment of money, including for civil liabilities predicated upon the federal securities laws of the United States, subject to certain requirements described below, may be enforced in Brazil. A judgment for the payment of a sum certain
against Brasil Telecom or any other person described in the preceding paragraph obtained outside Brazil would be enforceable in Brazil (to the extent that Brazilian courts may have jurisdiction)
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PART SEVEN—ADDITIONAL INFORMATION FOR SHAREHOLDERS
against us or any such person without reconsideration of the merits only if such judgment has been previously confirmed by the Brazilian Superior Court of Justice (
Superior Tribunal de
Justiça
). That confirmation generally will occur if the foreign judgment:
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fulfills all formalities required for its enforceability under the laws of the country where the foreign judgment is granted;
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is issued by a competent court after proper service of process of the parties is made in accordance with Brazilian law or after a legal recognition of
the party’s absence;
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has become final (not subject to appeal);
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is authenticated by a Brazilian consular office in the country where the foreign judgment is issued and is accompanied by a sworn translation into
Portuguese; and
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is not contrary to Brazilian national sovereignty or public policy or public morality.
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The confirmation process may be time-consuming and may also give rise to difficulties in enforcing the foreign judgment in Brazil.
Accordingly, we cannot assure you that confirmation would be obtained, that the confirmation process would be conducted in a timely manner, or that a Brazilian court would enforce a monetary judgment for violations of U.S. securities laws.
We have been further advised by Barbosa, Müssnich & Aragão Advogados that original actions predicated on
the federal securities laws of the United States may be brought in Brazilian courts and Brazilian courts will enforce civil liabilities in such actions against Brasil Telecom, its directors and officers and the advisors named herein (provided that
provisions of the federal securities laws of the United States do not contravene Brazilian public policy, good morals or national sovereignty and provided further that Brazilian courts can assert jurisdiction over the particular action).
A plaintiff, whether Brazilian or non-Brazilian, who resides outside Brazil or is outside Brazil during the course of litigation in
Brazil must grant a pledge to guarantee court costs and legal fees if the plaintiff owns no real property in Brazil that could secure such payment. This pledge must have a value sufficient to satisfy the payment of court fees and defendant’s
attorney’s fees, as determined by the Brazilian judge, except in the case of the enforcement of foreign judgments that have been duly confirmed by the Brazilian Superior Court of Justice.
The ability of a judgment creditor to satisfy a judgment by attaching certain assets of the defendant in Brazil is limited by provisions
of Brazilian law. In particular, (i) under the terms of our concessions, our subsidiaries’ licenses from ANATEL and applicable law, shares held by us in our subsidiaries cannot be transferred (including upon attachment) without
ANATEL’s approval in cases where such transfer would result in a change of control as defined under Brazilian laws and regulations, and (ii) our property that is considered essential for the rendering of public services under concession
agreements or licenses (bens vinculados à concessão ou bens reversíveis) is subject to immunity provided under Brazilian law and cannot be attached.
171
PART EIGHT—LEGAL AND REGULATORY MATTERS
Regulatory Approvals
We are not aware of any of the following:
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any governmental license or regulatory permit that appears to be material to the businesses of Brasil Telecom or TNL that might be adversely affected
by the merger;
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except as described below, any approval or other action by any government or governmental administrative or regulatory authority or agency, domestic or
foreign, that would be required for the completion of the merger; or
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except as described below, any consent, waiver or other approval that would be required as a result of or in connection with the merger, including but
not limited to, any consents or other approvals under any licenses, concessions, permits and agreements to which Brasil Telecom or TNL is a party that have not been obtained.
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Should any such approval or other action be required, we currently contemplate that such approval will be sought or such action will be
taken, as the case may be.
The approval of the merger by the CVM or the BM&FBOVESPA is not a condition to the merger.
The merger is conditioned on the prior approval of ANATEL, which ANATEL granted without conditions
on , 2011.
The merger is
conditioned on the declaration by the SEC that the registration statement of which this prospectus forms a part is effective. The approval by the NYSE of the listing of the Brasil Telecom Common ADSs and Brasil Telecom Preferred ADSs to be delivered
in connection with the merger, for which we will apply, must be obtained for these ADSs to be traded by their holders. However, this approval is not a condition to the completion of the merger.
We are unable to predict whether it may be necessary to delay the completion of the merger pending the outcome of any approval or other
action. We cannot assure you that any approval or other action, if needed, would be obtained or would be obtained without substantial conditions. In addition, we cannot assure you that if the approvals were not obtained or other actions were not
taken, adverse consequences might not result to our business or the businesses of our subsidiaries.
Brazilian
Antitrust Review
Under Brazilian antitrust regulations, TNL’s merger with our company is first analyzed by ANATEL to
assess the effects on competition of the merger, following which it will be submitted to CADE, the Brazilian antitrust authority, for final approval. As of the date of this prospectus, ANATEL had not yet submitted its findings to CADE. Brazilian law
permits us to consummate the merger prior to receiving the final approval from CADE. ANATEL and CADE will determine whether the merger negatively impacts competitive conditions in the markets in which we and TNL compete or adversely affects
consumers in these markets. Although we believe that CADE review of the merger will be favorable, we can offer no assurances that CADE will approve the merger or that CADE will not impose additional conditions on the merger.
Legal Matters
We have received an opinion from Barbosa, Müssnich & Aragão Advogados, São Paulo, Brazil, with respect to the validity of the common shares and preferred shares of Brasil
Telecom to be issued in connection with the merger. We were advised as to certain matters of U.S. law by White & Case LLP.
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PART EIGHT—LEGAL AND REGULATORY MATTERS
Experts
The financial statements of Brasil Telecom as of December 31, 2010 and 2009 and for the two years ended December 31, 2010,
which are incorporated into this prospectus by reference to the Brasil Telecom Annual Report, and the effectiveness of Brasil Telecom’s internal control over financial reporting, have been audited by Deloitte Touche Tohmatsu Auditores
Independentes, an independent registered public accounting firm, as stated in their reports incorporated by reference herein. Such financial statements have been so incorporated in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
The financial statements of TNL as of December 31, 2010 and 2009 and for the two
years ended December 31, 2010, which are incorporated into this prospectus by reference to the TNL Annual Report, and the effectiveness of TNL’s internal control over financial reporting, have been audited by Deloitte Touche Tohmatsu
Auditores Independentes, an independent registered public accounting firm, as stated in their reports incorporated by reference herein. Such financial statements have been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The consolidated statement of financial position of TNL as of
January 1, 2009 has been incorporated by reference herein in reliance upon the report of KPMG Auditores Associados (formerly known as BDO Auditores Independentes), an independent registered public accounting firm, which is incorporated by
reference herein, and upon the authority of said firm as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
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Item 20.
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Indemnification of Directors and Officers
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Neither the laws of Brazil nor the registrants’ constitutive documents provide for indemnification of directors and officers. However, the registrants’ directors and officers and certain of
their controlling persons benefit from insurance against civil liabilities, including civil liabilities in connection with the registration, offering and sale of the securities.
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Item 21.
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Exhibits and Financial Statements
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(a) Exhibits
The following documents are filed as exhibits to the
registration statement:
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Exhibit
Number
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Description of Document
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2.1
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Protocol of Merger and Instrument of Justification (
Protocolo e Justificação de Incorporação
), dated August 26, 2011, between Brasil Telecom
S.A. and Tele Norte Leste Participações S.A. (English translation).
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2.2
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Protocol and Justification of Partial Split-Off of Telemar Norte Leste S.A. with Incorporation of the Portion Ceded by Coari Participações S.A. and
Incorporação de Ações of Telemar Norte Leste S.A. by Coari Participações S.A. (
Protocolo e Justificação de Cisão Parcial da Telemar Norte Leste S.A. com Incorporação da
Parcela Cindida pela Coari Participações S.A., e Incorporação de Ações da Telemar Norte Leste S.A. pela Coari Participações S.A.
), between Telemar Norte Leste S.A. and Coari
Participações S.A., dated August 26, 2011 (English translation).
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2.3
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Protocol of Merger and Instrument of Justification (
Protocolo e Justificação de Incorporação
), dated August 26, 2011, between Brasil Telecom
S.A. and Coari Participações S.A. (English translation).
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3.1
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By-Laws (
Estatuto Social
) of Brasil Telecom S.A., as amended (English translation) (incorporated by reference to Exhibit 2 to Form 6-K of Brasil Telecom S.A. filed on June
29, 2011).
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4.1
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Form of Deposit Agreement (relating to common shares) among Brasil Telecom S.A., The Bank of New York Mellon, as Depositary, and all Owners and Holders from time to time of
American Depositary Shares issued thereunder (incorporated by reference to Exhibit 1 to Form F-6 of Brasil Telecom S.A. filed on September 4, 2009, File No. 333-161735).
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4.2
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Form of Amended and Restated Deposit Agreement (relating to preferred shares) among Brasil Telecom S.A., The Bank of New York Mellon, as Depositary, and all Owners and Holders
from time to time of American Depositary Shares issued thereunder (incorporated by reference to Exhibit 1 to Form F-6 of Brasil Telecom S.A. filed on September 4, 2009, File No. 333-161740).
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5.1
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Form of Opinion of Barbosa, Müssnich & Aragão Advogados regarding the common shares and preferred shares of Brasil Telecom S.A.
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8.1
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Form of Opinion of Barbosa, Müssnich & Aragão Advogados regarding tax matters and certain other matters.
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8.2
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Form of Opinion of White & Case LLP regarding U.S. tax matters.
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10.1
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Shareholders Agreement of Telemar Participações S.A., dated as of April 25, 2008, among AG Telecom Participações S.A., L.F. Tel S.A.,
Fundação Atlântico de Seguridade Social, Asseca Participações S.A. and, as intervening parties, Telemar Participações S.A. and Andrade Gutierrez Investimentos em Telecomunicações S.A.
(English translation) (incorporated by reference to Exhibit 99.4 to Schedule 13D of Brasil Telecom S.A. filed on November 27, 2009).
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II-1
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Exhibit
Number
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Description of Document
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10.2
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Amendment to the Shareholders Agreement of Telemar Participações S.A., dated as of January 25, 2011, among AG Telecom Participações S.A.,
Luxemburgo Participações S.A., L.F. Tel S.A., Fundação Atlântico de Seguridade Social, and, as intervening party, Telemar Participações S.A. (English translation) (incorporated by reference to Exhibit
3.02 to Form 20-F of Brasil Telecom S.A. filed on May 2, 2011).
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10.3
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Private Shareholders Agreement of Telemar Participações S.A., dated as of April 25, 2008, among AG Telecom Participações S.A., L.F. Tel S.A.,
Asseca Participações S.A., BNDES Participações S.A.—BNDESPar, Fiago Participações S.A., Fundação Atlântico de Seguridade Social, and, as intervening parties, Telemar
Participações S.A., Caixa de Previdência dos Funcionários do Banco do Brasil—PREVI, Fundação Petrobras de Seguridade Social—PETROS, Fundação dos Economiários
Federais—FUNCEF and Andrade Gutierrez Investimentos em Telecomunicações S.A. (English translation) (incorporated by reference to Exhibit 99.3 to Schedule 13D of Brasil Telecom S.A. filed on November 27, 2009).
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|
|
|
10.4
|
|
Amendment to Shareholders Agreement of Telemar Participações S.A., dated as of January 25, 2011, among AG Telecom Participações S.A., Luxemburgo
Participações S.A., BNDES Participações S.A.—BNDESPar, Caixa de Previdência dos Funcionários do Banco do Brasil—PREVI, Fundação Atlântico de Seguridade Social,
Fundação dos Economiários Federais—FUNCEF, Fundação Petrobras de Seguridade Social—PETROS, L.F. Tel S.A., Bratel Brasil S.A. and, as intervening parties, Telemar Participações S.A. and
Portugal Telecom, SGPS S.A. (English translation) (incorporated by reference to Exhibit 3.04 to Form 20-F of Brasil Telecom S.A. filed on May 2, 2011).
|
|
|
|
|
10.5
|
|
Concession Agreement for Local, Switched, Fixed-Line Telephone Service between ANATEL and Brasil Telecom S.A., No. 109/2011, dated June 30, 2011 (English
translation).
|
|
|
|
|
10.6
|
|
Concession Agreement for Domestic Long-Distance, Switched, Fixed-Line Telephone Service between ANATEL and Brasil Telecom S.A., No. 143/2011, dated June 30, 2011 (English
translation).
|
|
|
|
|
10.7
|
|
Statement of Authorization for Personal Mobile Services between ANATEL and Brasil Telecom Celular S.A., No. 026/2002, dated December 18, 2002 (English translation) (incorporated
by reference to Exhibit 4.05 to Brasil Telecom S.A.’s annual report on Form 20-F filed on July 13, 2009).
|
|
|
|
|
10.8
|
|
Schedule of Omitted Authorizations for Personal Mobile Services (incorporated by reference to Exhibit 4.06 to Form 20-F of Brasil Telecom S.A. filed on May 2,
2011).
|
|
|
|
|
10.9
|
|
Instrument of Authorization for the Use of Radio Frequency Blocks for 2G services between ANATEL and 14 Brasil Telecom Celular S.A., No. 24/2004, dated May 3, 2004 (English
translation) (incorporated by reference to Exhibit 4.07 to Brasil Telecom S.A.’s annual report on Form 20-F filed on July 13, 2009).
|
|
|
|
|
10.10
|
|
Schedule of Omitted Instruments of Authorization for the Use of Radio Frequency Blocks for 2G services (incorporated by reference to Exhibit 4.08 to Form 20-F of Brasil Telecom
S.A. filed on May 2, 2011).
|
|
|
|
|
10.11
|
|
Instrument of Authorization for the Use of Radio Frequency Blocks for 3G services between ANATEL and 14 Brasil Telecom Celular S.A., No. 24/2008, dated April 29, 2008
(English translation) (incorporated by reference to Exhibit 4.09 to Brasil Telecom S.A.’s annual report on Form 20-F filed on July 13, 2009).
|
|
|
|
|
10.12
|
|
Schedule of Omitted Instruments of Authorization for the Use of Radio Frequency Blocks for 3G services (incorporated by reference to Exhibit 4.10 to Form 20-F of Brasil Telecom
S.A. filed on May 2, 2011).
|
II-2
|
|
|
|
|
Exhibit
Number
|
|
Description of Document
|
|
|
|
|
10.13
|
|
Stock Option Plan (2000) of Telecomunicações do Paraná S.A.—Telepar (predecessor to Brasil Telecom S.A.) (English translation) (incorporated by
reference to Exhibit 4.11 to Brasil Telecom S.A.’s annual report on Form 20-F filed on July 13, 2009).
|
|
|
|
|
12.1
|
|
Computation of Ratio of Combined Fixed Charges and Preference Dividends to Earnings of Brasil Telecom S.A. and Tele Norte Leste Participações S.A.
|
|
|
|
|
21.1
|
|
List of subsidiaries of Brasil Telecom S.A. (incorporated by reference to Exhibit 8.01 to Form 20-F of Brasil Telecom S.A. filed on May 2, 2011).
|
|
|
|
|
23.1
|
|
Consent of Deloitte Touche Tohmatsu Auditores Independentes (Brasil Telecom).
|
|
|
|
|
23.2
|
|
Consent of Deloitte Touche Tohmatsu Auditores Independentes (Tele Norte Leste Participações S.A.).
|
|
|
|
|
23.3
|
|
Consent of KPMG Auditores Associados (formerly known as BDO Auditores Independentes) (Tele Norte Leste Participações S.A.).
|
|
|
|
|
23.4
|
|
Consent of Barbosa, Müssnich & Aragão Advogados (included in Exhibits 5.1 and 8.1).
|
|
|
|
|
23.5
|
|
Consent of White & Case LLP (included in Exhibit 8.2).
|
|
|
|
|
23.6
|
|
Consent of Apsis Consultoria Empresarial Ltda.
|
|
|
|
|
23.7
|
|
Consent of Banco Itaú BBA S.A.
|
|
|
|
|
23.8
|
|
Consent of Banco BTG Pactual S.A.
|
|
|
|
|
24.1
|
|
Powers of attorney of certain officers and directors of Brasil Telecom, included in signature page.
|
|
|
|
|
99.1
|
|
Report of Apsis Consultoria Empresarial Ltda. regarding the net asset value of Tele Norte Leste Participações S.A. based on the book value of its assets and
liabilities (English translation) (included in Exhibit 2.1).
|
|
|
|
|
99.2
|
|
Report of Apsis Consultoria Empresarial Ltda. regarding the net worth of Brasil Telecom S.A. and Tele Norte Leste Participações S.A. calculated at market prices
(English translation) (included in Exhibit 2.1).
|
|
|
|
|
99.3
|
|
Presentation of Economic-Financial Analyses of Banco Itaú BBA S.A. (English translation).
|
|
|
|
|
99.4
|
|
Presentation of Financial Analyses of Banco BTG Pactual S.A. (English translation).
|
|
|
|
|
99.5 †
|
|
Report of Independent Special Committee of Brasil Telecom S.A. (English translation).
|
|
|
|
|
99.6 †
|
|
Report of Independent Special Committee of Tele Norte Leste Participações S.A. (English translation).
|
|
|
|
|
99.7 †
|
|
Form of Letter of Transmittal.
|
|
|
|
|
99.8 †
|
|
Call Notice for Extraordinary General Shareholders’ Meeting of Brasil Telecom S.A. (English translation).
|
|
|
|
|
99.9 †
|
|
Call Notice for Extraordinary General Shareholders’ Meeting of Tele Norte Leste Participações S.A. (English translation).
|
|
†
|
To be filed by amendment.
|
There are omitted from the exhibits filed with or incorporated by reference into this registration statement certain promissory notes and
other instruments and agreements with respect to the long-term debt of Brasil Telecom, none of which authorizes securities in a total amount that exceeds 10% of the total assets of Brasil Telecom, respectively. We hereby agree to furnish to the SEC
copies of any such omitted promissory notes or other instruments or agreements as the Commission requests.
II-3
(b) Schedules.
None required.
(a) The
undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, as amended (the “Securities Act”), each filing of the registrant’s annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Exchange Act) that is incorporated
by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration
statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the
volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus
filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in
the effective registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) To file a post-effective amendment to the registration statement to include any financial statements required by
Item 8.A of Form 20-F at the start of any delayed offering or throughout a continuous offering.
(c)(1) The
undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus shall contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of the applicable form.
(2) The
registrants undertake that every prospectus (i) that is filed pursuant to the paragraph immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, shall be filed as a part of an amendment to the registration statement and shall not be used until such amendment is effective, and that,
II-4
for purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(d)
The undersigned registrant hereby undertakes: (i) to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other equally prompt means, and (ii) to arrange or provide for a facility in the United States for the purpose of responding to such requests. The undertaking in
clause (i) above includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
(e) The undersigned registrant hereby undertake to supply by means of a post-effective amendment all information concerning a transaction
and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
(f) The undersigned registrant hereby undertakes that:
(1) For
purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Rio de Janeiro, State of Rio de Janeiro, Brazil, on August 31, 2011.
|
|
|
|
|
BRASIL TELECOM S.A.
|
|
|
|
|
By:
|
|
/s/ Francisco Tosta Valim Filho
|
|
|
|
|
|
Name:
Title:
|
|
Francisco Tosta Valim Filho
Chief Executive Officer
|
|
|
|
|
By:
|
|
/s/ Alex Waldemar Zornig
|
|
|
|
|
|
Name:
Title:
|
|
Alex Waldemar Zornig
Chief Executive Officer
|
POWER OF ATTORNEY AND SIGNATURES
Each person whose signature appears below hereby constitutes and appoints Alex Waldemar Zornig and Bayard De Paoli Gontijo, and each of
them severally, his true and lawful attorney-in-fact with power of substitution and resubstitution to sign in his name, place and stead in any and all capacities the Registration Statement and any and all amendments thereto (including post-effective
amendments) and any documents in connection therewith, and to file the same with the Securities and Exchange Commission, granting unto each of said attorneys full power to act with or without the other, and full power and authority to do and
perform, in his name and on his behalf, every act whatsoever which such attorneys, or any one of them, may deem necessary or desirable to be done in connection therewith as fully and to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact, or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on August 31, 2011.
|
|
|
|
|
Signature
|
|
Title
|
|
|
|
|
/s/ José Mauro Mettrau Carneiro da
Cunha
José Mauro Mettrau Carneiro da Cunha
|
|
Chairman of the Board of Directors
|
|
|
|
|
|
|
/s/ Francisco Tosta Valim
Filho
Francisco Tosta Valim Filho
|
|
Chief Executive Officer
|
|
|
|
|
/s/ Alex Waldemar Zornig
Alex Waldemar Zornig
|
|
Chief Financial Officer
|
|
|
|
|
/s/ Gisele Silva
Melo
Gisele Silva Melo
|
|
Chief Accounting Officer
|
|
|
|
|
/s/ João de Deus Pinheiro
Macedo
João de Deus Pinheiro Macedo
|
|
Vice Chairman
|
II-6
|
|
|
|
|
|
|
|
/s/ Júlio César
Fonseca
Júlio César Fonseca
|
|
Alternate Director
|
|
|
|
|
/s/ Francis James Leahy
Meaney
Francis James Leahy Meaney
|
|
Director
|
|
|
|
|
/s/ João Carlos de Almeida
Gaspar
João Carlos de Almeida Gaspar
|
|
Director
|
|
|
|
|
/s/ Donald J.
Puglisi
Donald J. Puglisi
Managing Director
Puglisi & Associates
|
|
Authorized Representative in the United States
|
II-7
EXHIBIT INDEX
|
|
|
|
|
Exhibit
Number
|
|
Description of Document
|
|
2.1
|
|
Protocol of Merger and Instrument of Justification (
Protocolo e Justificação de Incorporação
), dated August 26, 2011, between Brasil Telecom S.A.
and Tele Norte Leste Participações S.A. (English translation).
|
|
|
|
|
2.2
|
|
Protocol and Justification of Partial Split-Off of Telemar Norte Leste S.A. with Incorporation of the Portion Ceded by Coari Participações S.A. and
Incorporação de Ações of Telemar Norte Leste S.A. by Coari Participações S.A. (
Protocolo e Justificação de Cisão Parcial da Telemar Norte Leste S.A. com Incorporação da
Parcela Cindida pela Coari Participações S.A., e Incorporação de Ações da Telemar Norte Leste S.A. pela Coari Participações S.A.
), between Telemar Norte Leste S.A. and Coari
Participações S.A., dated August 26, 2011 (English translation).
|
|
|
|
|
2.3
|
|
Protocol of Merger and Instrument of Justification (
Protocolo e Justificação de Incorporação
), dated August 26, 2011, between Brasil Telecom S.A.
and Coari Participações S.A. (English translation).
|
|
|
|
|
3.1
|
|
By-Laws (
Estatuto Social
) of Brasil Telecom S.A., as amended (English translation) (incorporated by reference to Exhibit 2 to Form 6-K of Brasil Telecom S.A. filed on June
29, 2011).
|
|
|
|
|
4.1
|
|
Form of Deposit Agreement (relating to common shares) among Brasil Telecom S.A., The Bank of New York Mellon, as Depositary, and all Owners and Holders from time to time of American
Depositary Shares issued thereunder (incorporated by reference to Exhibit 1 to Form F-6 of Brasil Telecom S.A. filed on September 4, 2009, File No. 333-161735).
|
|
|
|
|
4.2
|
|
Form of Amended and Restated Deposit Agreement (relating to preferred shares) among Brasil Telecom S.A., The Bank of New York Mellon, as Depositary, and all Owners and Holders from
time to time of American Depositary Shares issued thereunder (incorporated by reference to Exhibit 1 to Form F-6 of Brasil Telecom S.A. filed on September 4, 2009, File No. 333-161740).
|
|
|
|
|
5.1
|
|
Form of Opinion of Barbosa, Müssnich & Aragão Advogados regarding the common shares and preferred shares of Brasil Telecom S.A.
|
|
|
|
|
8.1
|
|
Form of Opinion of Barbosa, Müssnich & Aragão Advogados regarding tax matters and certain other matters.
|
|
|
|
|
8.2
|
|
Form of Opinion of White & Case LLP regarding U.S. tax matters.
|
|
|
|
|
10.1
|
|
Shareholders Agreement of Telemar Participações S.A., dated as of April 25, 2008, among AG Telecom Participações S.A., L.F. Tel S.A.,
Fundação Atlântico de Seguridade Social, Asseca Participações S.A. and, as intervening parties, Telemar Participações S.A. and Andrade Gutierrez Investimentos em Telecomunicações S.A.
(English translation) (incorporated by reference to Exhibit 99.4 to Schedule 13D of Brasil Telecom S.A. filed on November 27, 2009).
|
|
|
|
|
10.2
|
|
Amendment to the Shareholders Agreement of Telemar Participações S.A., dated as of January 25, 2011, among AG Telecom Participações S.A., Luxemburgo
Participações S.A., L.F. Tel S.A., Fundação Atlântico de Seguridade Social, and, as intervening party, Telemar Participações S.A. (English translation) (incorporated by reference to Exhibit 3.02 to
Form 20-F of Brasil Telecom S.A. filed on May 2, 2011).
|
|
|
|
|
10.3
|
|
Private Shareholders Agreement of Telemar Participações S.A., dated as of April 25, 2008, among AG Telecom Participações S.A., L.F. Tel S.A., Asseca
Participações S.A., BNDES Participações S.A.—BNDESPar, Fiago Participações S.A., Fundação Atlântico de Seguridade Social, and, as intervening parties, Telemar
Participações S.A., Caixa de Previdência dos Funcionários do Banco do Brasil—PREVI, Fundação Petrobras de Seguridade Social—PETROS, Fundação dos Economiários
Federais—FUNCEF and Andrade Gutierrez Investimentos em Telecomunicações S.A. (English translation) (incorporated by reference to Exhibit 99.3 to Schedule 13D of Brasil Telecom S.A. filed on November 27, 2009).
|
|
|
|
|
|
Exhibit
Number
|
|
Description of Document
|
|
10.4
|
|
Amendment to Shareholders Agreement of Telemar Participações S.A., dated as of January 25, 2011, among AG Telecom Participações S.A., Luxemburgo
Participações S.A., BNDES Participações S.A.—BNDESPar, Caixa de Previdência dos Funcionários do Banco do Brasil—PREVI, Fundação Atlântico de Seguridade Social,
Fundação dos Economiários Federais—FUNCEF, Fundação Petrobras de Seguridade Social—PETROS, L.F. Tel S.A., Bratel Brasil S.A. and, as intervening parties, Telemar Participações S.A. and
Portugal Telecom, SGPS S.A. (English translation) (incorporated by reference to Exhibit 3.04 to Form 20-F of Brasil Telecom S.A. filed on May 2, 2011).
|
|
|
|
|
10.5
|
|
Concession Agreement for Local, Switched, Fixed-Line Telephone Service between ANATEL and Brasil Telecom S.A., No. 109/2011, dated June 30, 2011 (English
translation).
|
|
|
|
|
10.6
|
|
Concession Agreement for Domestic Long-Distance, Switched, Fixed-Line Telephone Service between ANATEL and Brasil Telecom S.A., No. 143/2011, dated June 30, 2011 (English
translation).
|
|
|
|
|
10.7
|
|
Statement of Authorization for Personal Mobile Services between ANATEL and Brasil Telecom Celular S.A., No. 026/2002, dated December 18, 2002 (English translation) (incorporated by
reference to Exhibit 4.05 to Brasil Telecom S.A.’s annual report on Form 20-F filed on July 13, 2009).
|
|
|
|
|
10.8
|
|
Schedule of Omitted Authorizations for Personal Mobile Services (incorporated by reference to Exhibit 4.06 to Form 20-F of Brasil Telecom S.A. filed on May 2,
2011).
|
|
|
|
|
10.9
|
|
Instrument of Authorization for the Use of Radio Frequency Blocks for 2G services between ANATEL and 14 Brasil Telecom Celular S.A., No. 24/2004, dated May 3, 2004 (English
translation) (incorporated by reference to Exhibit 4.07 to Brasil Telecom S.A.’s annual report on Form 20-F filed on July 13, 2009).
|
|
|
|
|
10.10
|
|
Schedule of Omitted Instruments of Authorization for the Use of Radio Frequency Blocks for 2G services (incorporated by reference to Exhibit 4.08 to Form 20-F of Brasil Telecom S.A.
filed on May 2, 2011).
|
|
|
|
|
10.11
|
|
Instrument of Authorization for the Use of Radio Frequency Blocks for 3G services between ANATEL and 14 Brasil Telecom Celular S.A., No. 24/2008, dated April 29, 2008 (English
translation) (incorporated by reference to Exhibit 4.09 to Brasil Telecom S.A.’s annual report on Form 20-F filed on July 13, 2009).
|
|
|
|
|
10.12
|
|
Schedule of Omitted Instruments of Authorization for the Use of Radio Frequency Blocks for 3G services (incorporated by reference to Exhibit 4.10 to Form 20-F of Brasil Telecom S.A.
filed on May 2, 2011).
|
|
|
|
|
10.13
|
|
Stock Option Plan (2000) of Telecomunicações do Paraná S.A.—Telepar (predecessor to Brasil Telecom S.A.) (English translation) (incorporated by reference
to Exhibit 4.11 to Brasil Telecom S.A.’s annual report on Form 20-F filed on July 13, 2009).
|
|
|
|
|
12.1
|
|
Computation of Ratio of Combined Fixed Charges and Preference Dividends to Earnings of Brasil Telecom S.A. and Tele Norte Leste Participações S.A.
|
|
|
|
|
21.1
|
|
List of subsidiaries of Brasil Telecom S.A. (incorporated by reference to Exhibit 8.01 to Form 20-F of Brasil Telecom S.A. filed on May 2, 2011).
|
|
|
|
|
23.1
|
|
Consent of Deloitte Touche Tohmatsu Auditores Independentes (Brasil Telecom).
|
|
|
|
|
23.2
|
|
Consent of Deloitte Touche Tohmatsu Auditores Independentes (Tele Norte Leste Participações S.A.).
|
|
|
|
|
23.3
|
|
Consent of KPMG Auditores Associados (formerly known as BDO Auditores Independentes) (Tele Norte Leste Participações S.A.).
|
|
|
|
|
23.4
|
|
Consent of Barbosa, Müssnich & Aragão Advogados (included in Exhibits 5.1 and 8.1).
|
|
|
|
|
23.5
|
|
Consent of White & Case LLP (included in Exhibit 8.2).
|
|
|
|
|
|
Exhibit
Number
|
|
Description of Document
|
|
23.6
|
|
Consent of Apsis Consultoria Empresarial Ltda.
|
|
|
|
|
23.7
|
|
Consent of Banco Itaú BBA S.A.
|
|
|
|
|
23.8
|
|
Consent of Banco BTG Pactual S.A.
|
|
|
|
|
24.1
|
|
Powers of attorney of certain officers and directors of Brasil Telecom, included in signature page.
|
|
|
|
|
99.1
|
|
Report of Apsis Consultoria Empresarial Ltda. regarding the net asset value of Tele Norte Leste Participações S.A. based on the book value of its assets and
liabilities (English translation) (included in Exhibit 2.1).
|
|
|
|
|
99.2
|
|
Report of Apsis Consultoria Empresarial Ltda. regarding the net worth of Brasil Telecom S.A. and Tele Norte Leste Participações S.A. calculated at market prices
(English translation) (included in Exhibit 2.1).
|
|
|
|
|
99.3
|
|
Presentation of Economic-Financial Analyses of Banco Itaú BBA S.A. (English translation).
|
|
|
|
|
99.4
|
|
Presentation of Financial Analyses of Banco BTG Pactual S.A. (English translation).
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|
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99.5†
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Report of Independent Special Committee of Brasil Telecom S.A. (English translation).
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99.6†
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Report of Independent Special Committee of Tele Norte Leste Participações S.A. (English translation).
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99.7†
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Form of Letter of Transmittal.
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99.8†
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Call Notice for Extraordinary General Shareholders’ Meeting of Brasil Telecom S.A. (English translation).
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99.9†
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Call Notice for Extraordinary General Shareholders’ Meeting of Tele Norte Leste Participações S.A. (English translation).
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†
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To be filed by amendment.
|
Exhibit 2.1
PROTOCOL AND JUSTIFICATION OF THE MERGER OF TELE NORTE LESTE PARTICIPAÇÕES S.A. INTO BRASIL TELECOM S.A.
TELE NORTE LESTE PARTICIPAÇÕES S.A.
, a publicly-held company with head offices in the City of Rio de Janeiro, State of Rio de Janeiro, Rua Humberto de Campos 425, 8th floor - part,
registered with the Treasury Ministry on the National Corporate Taxpayers’ Register under CNPJ/MF No. 02.558.134/0001-58, represented herein as set forth in its corporate by-laws (“
TNL
”);
and
BRASIL TELECOM S.A.
, a publicly-held company with head offices in the City of Rio de Janeiro, Rua General Polidoro, No. 99, 5th
floor/part – Botafogo, registered with the Treasury Ministry on the National Corporate Taxpayers’ Register under CNPJ/MF No. 76.535.764/0001-43, represented herein as set forth in its corporate by-laws (“
BRT
”);
TNL and BRT, together called simply the “
Parties
” or “
Companies
”.
WHEREAS:
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(i)
|
BRT is a publicly-held company that is a direct subsidiary of Coari Participações S.A. (“Coari”), whose purpose is to provide telecommunications
services and perform other activities that are necessary or useful for the provision of such services, in compliance with the concessions, authorizations and permits granted thereto. When pursuing its purpose, BRT may acquire third party assets,
goods and rights in its net equity, as well as: (i) hold stakes in the capital of other companies, provided that it complies with the Brazilian national telecommunications policy; (ii) establish wholly-owned subsidiaries in order to
perform activities encompassed by its purpose, when decentralization is recommended; (iii) undertake the importation of goods and services required to perform the activities encompassed by its purpose; (iv) provide technical assistance
services to telecommunications companies performing activities of common interest; (v) undertake activities related to studies and surveys fostering the development of the telecommunications sector; (vi) execute contracts and agreements
with other companies providing telecommunications services or any persons or entities, in order to ensure the operation of the services, without adversely affecting its duties and responsibilities; and (vii) perform other similar activities or
activities correlated to its corporate purpose;
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(ii)
|
TNL is a publicly-held company that is the direct controlling shareholder of Telemar Norte Leste S.A. (“TMAR”) and the indirect controlling shareholder of
BRT, whose purpose is (i) to exercise the control of fixed telephone public utility companies in Region I referred to in the General Concession Plan approved by Decree No. 2,534, dated as of April 2, 1998; (ii) to promote through
controlled or affiliated companies the expansion and set up of fixed telephone services in their respective concession areas; (iii) to promote, carry out or direct the funding, from domestic or foreign sources, to be invested by the Company or
by its controlled companies; (iv) to promote and encourage study and research activities aiming to develop the fixed telephone segment; (v) to provide through controlled or affiliated companies skilled technical services related to the
fixed telephone area; (vi) to promote, encourage and coordinate through its controlled or affiliated companies the education and training of personnel necessary to the fixed telephone segment; (vii) to carry out or promote the importation
of goods and services to or through its controlled and/or affiliated companies; (viii) to exercise other activities similar to related to the purpose thereof; and (ix) to hold stakes in the capital of other companies;
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(iii)
|
On May 24, 2011, the Parties, together with TMAR and Coari (collectively, the “Oi Companies”) disclosed a Statement of Material Fact to the market in
which they announced approval by the prior meeting of the shareholders of TNL’s parent company Telemar Participações S.A. (“TmarPart”), of instructions to the managements of the Oi Companies to conduct studies and take
the steps required to implement a corporate reorganization of the Oi Companies, consisting of (i) the share exchange between TMAR and Coari, (ii) the merger of Coari into BRT, and (iii) the merger of TNL into BRT (collectively, the
“Corporate Reorganization”);
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(iv)
|
Given that the Merger (as defined below) is a transaction between a controlling shareholder and its subsidiary, the managements of TNL and BRT have constituted
independent special committees, pursuant to and for the purposes of CVM Guideline No. 35, in order to analyze and negotiate the conditions of the Merger and submit its recommendations to the Boards of Directors of the companies;
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(v)
|
On August 1, 2011, the Oi Companies disclosed a Statement of Material Fact to the market in which they announced that the Independent Special Committees of TNL,
TMAR and BRT had provided recommendations to the Boards of Directors of the Oi Companies with respect to the exchange ratios in connection with the Corporate Reorganization. On August 17, 2011, the Oi Companies disclosed a Statement of Material
Fact to the market in which they announced that the Boards of Directors of the Oi Companies had determined the exchange ratios applicable to the Corporate Reorganization;
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(vi)
|
The Oi Companies have extremely complex shareholder bases, which are currently dispersed among three publicly-traded companies with a total of seven different classes
of publicly traded shares; and
|
|
(vii)
|
The Corporate Reorganization is intended to simplify the corporate structure and governance of the Oi Companies by consolidating the shareholder bases of the Oi
Companies in one public company with two classes of shares that will be traded in Brazil and abroad, eliminating operating costs and overhead while enhancing liquidity for all the shareholders of the Oi Companies;
|
Being in full and fair agreement, the Parties hereby execute this Protocol and Justification of the Merger of Coari Participações S.A. into
Brasil Telecom S.A. (“Protocol and Justification”), in compliance with Articles 224, 225, 227
et seq.
of Law No. 6,404/76 (the “
Brazilian Corporation Law
”), under the following terms and conditions.
CLAUSE ONE – PROPOSED TRANSACTION AND JUSTIFICATION
1.1.
Proposed Transaction
. The Proposed Transaction consists of the merger of TNL into its subsidiary BRT, transferring all the assets of TNL to BRT, which will become the successor of all the
goods, rights and obligations of Coari, pursuant to Articles 227 of the Brazilian Corporation Law (the “
Merger”
).
1.2.
Justification of the Merger
. The Merger is one of the steps of the Corporate Reorganization, the purpose of which is to simplify the corporate structure and governance of the Oi Companies, eliminating operating costs and overhead while
enhancing liquidity for all shareholders of the Oi Companies. Furthermore, the managements of TNL and BRT believe that the Merger furthers the best interests of their shareholders, particularly through (i) consolidating the shareholder bases of
the Oi Companies in one public company with two classes of shares that will be traded in Brazil and abroad; (ii) simplifying the capital and corporate structures of TNL and BRT, reducing administrative costs; (iii) aligning the interests
of the shareholders of TNL and BRT; (iv) enhancing the liquidity of the shares issued by BRT; and (v) promptly eliminating the costs of separate listings of the shares of TNL and BRT, as well as costs arising from separately complying with
the public disclosure requirements applicable to TNL and BRT.
CLAUSE TWO – INDEPENDENT SPECIAL COMMITEES
2.1. Pursuant to the provisions of CVM Guideline No. 35, the managements of TNL and BRT each constituted an independent special committee to analyze
and negotiate the conditions of the Merger. After independently analyzing and discussing the conditions for the Merger, based on the documents and information provided by the management of the Companies and other data publically available regarding
the Oi Companies, and in compliance with the information examined and discussed with Banco BTG Pactual S.A. and Banco Itaú BBA S.A., the independent financial advisors engaged to provide assistance with respect to the analysis of the Merger
by the TNL and BRT Independent Special Committees, respectively, the Independent Special Committees presented their conclusions to the management of the Companies, concluding that the following exchange ratios represent an appropriate appraisal of
the value of the Companies and is fair for the Merger.
2
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Original Share/Share to be distributed
|
|
Exchange Ratio*
|
|
TNLP3/BRTO3
|
|
2.3122x
|
|
TNLP4/BRTO4
|
|
2.1428x**
|
|
TNLP4/BRTO3
|
|
1.8581x**
|
|
*
|
The exchange ratios disclosed in the table above are not cumulative, as set forth in Clause 3.1.
|
|
**
|
The exchange ratios for TNLP4/BRTO4 shares and TNLP4 /BRTO3 shares shall comply with the provisions established in Clause 3.1.2.
|
2.2. In order to comply with the legal limit for the division of share capital between shares with and without voting rights, the exchange ratios
recommended by the independent special committees shall be adjusted, so that the holder of each TNL preferred share will receive in exchange both common and preferred shares of BRT, as provided in the following Clause.
CLAUSE THREE – NUMBER, TYPE AND CLASS OF SHARES TO BE DISTRIBUTED TO TNL SHAREHOLDERS
3.1.
Number, Type and Class of Shares to be Distributed
. As a result of the Merger, BRT will distribute 2.3122 common shares of BRT in substitution
for each outstanding common share of TNL, and 0.1879 common share and 1.9262 preferred share of BRT in substitution for each outstanding preferred share of TNL (the “Exchange Ratios”).
3.1.1.
Distribution and Redemption BRT Shares Prior to the Merger
. At the extraordinary general shareholders’ meeting of BRT
called to consider and approve the Merger, BRT will propose the issuance of redeemable stock of BRT to be distributed exclusively to BRT shareholders prior to the Merger, which will be redeemed immediately in cash for the aggregate amount of R$1.5
billion, or the equivalent of R$2.543282 (two
reais
, fifty-four
centavos
and fraction) per share to be paid in proportion to the interest owned by each shareholder in the equity capital of BRT. The Exchange Ratio presented above has
been adjusted to reflect the value of the shares of BRT to be redeemed.
3.1.2. The Exchange Ratio initially respects the
classes of shares currently owned by each shareholder. However, in order to comply with the legal limit on the division of the equity capital of BRT between shares with and without voting rights, the holders of TNL preferred shares will also receive
common shares issued by BRT in replacement, in the proportion of 10.11% of the value of its shares, and therefore will receive 10.11% of the announced exchange ratio of TNLP4/BRTO3 (1.8581x*10.11%=0.1879x) and 89.89% of the announced exchange
ratio of TNLP4/BRTO4 (2.1428x*89.89%=1.9262x).
3.2.
Criteria Used to Determine the Exchange Ratios
. The Exchange Ratios were approved
by the Board of Directors of TNL and BRT based on the analysis and negotiations conducted by the independent special committees of TNL and BRT, which have negotiated the conditions to the Merger, as set forth in CVM Guideline No. 35. The
independent special committees based their recommendations to the Boards of Directors of TNL and BRT on market prices of the preferred and common shares of TNL and BRT, using as a parameter the average trading volume of these shares during the
thirty (30) days prior to the date of the Statement of Material Fact that announced the Merger on May 24, 2011. The Exchange Ratios take into consideration the fact that the shares issued by BRT are liquid, the distribution of BRT
redeemable shares announced in the Statement of Material Fact released on May 24, 2011 and that the valuation method of shares at market prices is the most appropriate.
3.3.
Share Fractions
. Fractional shares issued by BRT and distributed to individual TNL shareholders in connection with the Merger will be grouped into full shares and sold in auctions to be held
on the BM&FBOVESPA – Bolsa de Valores, Mercadorias e Futuros (the “BM&FBOVESPA”), with the proceeds of such auctions, delivered to the respective shareholders after the final financial settlement of the sale of such shares in
the auctions.
3
CLAUSE FOUR – NET WORTH APPRAISAL CRITERIA FOR BRT AND COARI
4.1.
Net Worth Appraisal
. The shares of TNL was appraised on the basis of their book value, as set forth in the audited financial statements of TNL
as of the base date of June 30, 2011 (the “Base Date”). Pursuant to the provisions set forth in Articles 226 and 227 of the Brazilian Corporation Law, Apsis Consultoria Empresarial Ltda., with head offices at Rua São
José, No. 90 – suite 1,082, in the City and State of Rio de Janeiro, registered with the Treasury Ministry on the National Corporate Tax-Payers’ Roll under CNPJ/MF No. 27.281.922/0001-70 (“
Apsis
”) was
selected to conduct the appraisal of the net equity of TNL. The selection and engagement of Apsis must be ratified and approved by the shareholders of TNL and BRT. As set forth in the Equity Appraisal Report included as Annex 4.1 hereto, the book
value of the net equity of TNL on the Base Date was R$8,426,204,248.24 (eight billion, four hundred twenty-six million, two hundred four thousand, two hundred forty
reais
and twenty-four
centavos
), or R$18.02 (eighteen
reais
and
two
centavos
) per TNL share, taking into account the previous partial split-off of TMAR and the acquisition of the split-off portion by TNL as well as the merger of Coari into BRT.
4.2.
Appraisal of the Net Worth of TNL and BRT at Market Prices
. In compliance with the provisions set forth in Article 264 of the Brazilian Corporation Law, Apsis was selected to prepare the net
worth appraisal report of TNL and BRT at market prices. The appraisals of the net worth of TNL and BRT at market prices included as Annex 4.2 hereto were prepared using the same criteria and as of the Base Date (“
Appraisal Report on Net
Worth at Market Prices
”), resulting in, solely for the purposes of Article 264 of the Brazilian Corporation Law, an Exchange Ratio of 2.302004 BRT shares for each TNL share.
4.3.
Analysis of Equitable Treatment of the Corporate Reorganization
. In compliance with the provisions set forth in Article 41 of the corporate by-laws of TNL, an independent company will be
engaged to prepare a financial and economical analysis with the purpose of confirming whether the Corporate Reorganization is equitable to all the companies involved in the Corporate Reorganization. This analysis will be presented to the Board of
Directors of TNL and will be available to all the shareholders of the companies involved in the Corporate Reorganization, prior to the general shareholders’ meeting of TNL called to consider the Merger.
4.4.
Treatment of Equity Variations
. Any equity variations occurring in TNL as from the Base Date until the date of the approval of the Merger
will be absorbed directly by BRT.
CLAUSE FIVE – SHARES OF ONE COMPANY HELD BY ANOTHER AND SHARES HELD IN TREASURY
5.1.
Treatment of Shares Issued by one Company and Held by Another Company
. Upon the approval of the Merger and the resulting closure of TNL, all
shares issued by BRT and held by TNL before the Merger will be cancelled, except for 24,646,937 (twenty four million, six hundred forty-six thousand, nine hundred thirty-seven) common shares, which will be held in treasury by BRT. There are no
shares issued by TNL held by BRT.
|
5.2.
|
Treatment of Shares Held in Treasury
. The other shares held in treasury prior to the Merger will be cancelled.
|
CLAUSE SIX – INCREASE IN THE EQUITY CAPITAL OF BRT
6.1.
Reduction in the Equity Capital of BRT
. The Merger will result in a reduction in the equity capital of BRT in the amount of R$1,117,802,971.45 (one billion, one hundred seventeen million,
eight hundred two thousand, nine hundred seventy-one
reais
and forty-five
centavos
) through absorption of the net assets of TNL, as set forth in the Equity Appraisal Report and in compliance with the provisions set forth in Article
227, §1, of the Brazilian Corporation Law. 304,487,934 (three hundred four million, four hundred eighty-seven thousand, nine hundred thirty-four) common shares of BRT will be cancelled and 179,629,100 (one hundred seventy-nine million, six
hundred twenty-nine thousand, one hundred) registered preferred shares will be issued by BRT, without par value, that will be distributed to the current TNL shareholders, replacing the TNL shares held by such holders, which will be cancelled.
4
6.2.
Composition of the Net Assets of TNL
. The book value of the net assets of TNL to be acquired by
BRT is will result in a reduction of the equity capital of BRT in the amount of R$1,117,802,971.45 (one billion, one hundred seventeen million, eight hundred two thousand, nine hundred seventy-one
reais
and forty-five
centavos
).
6.3.
Composition of the Equity Capital of BRT after the Merger
. As a result of the above-mentioned reduction of the equity capital of
BRT, the equity capital of BRT will be reduced to R$6,816,467,847.01(six billion, eight hundred sixteen million, four hundred sixty-seven thousand, eight hundred forty-seven
reais
and one
centavo
), represented by 598,999,380 (five
hundred ninety-eight million, nine hundred ninety-nine thousand, three hundred eighty) registered common shares and 1,198,070,309 (one billion, one hundred ninety-eight million, seventy thousand, three hundred nine) registered preferred shares, ,
with no par value.
6.4. All the shares issued by TNL will be canceled through the Merger, being replaced by preferred and common shares to be
issued by BRT, in accordance with the Exchange Ratios as adjusted as set forth in Clause 3.1.2.
CLAUSE SEVEN – AMENDMENT OF THE
CORPORATE BY-LAWS OF BRT
7.1.
Amendment to the BRT Corporate By-Laws
. As disclosed in the Material Fact released on May 24,
2011, the Corporate Reorganization comprises, among other transactions, the merger of Coari into BRT and the Merger provided for in this Protocol and Justification, which will be both considered at a single general shareholders’ meeting of BRT,
to be timely called. As a result of the merger of Coari into BRT and the Merger, the corporate by-laws of BRT must be amended in order to reflect the change in the share capital and number of shares into which BRT’s share capital is divided.
Therefore, after these transactions are approved, the following proposed amendment to the main section of Article 5 of the corporate by-laws of BRT will be submitted to its shareholders:
“
Article 5
- The fully paid-in and subscribed Equity Capital is R$6,816,467,847.01(six billion, eight hundred sixteen million,
four hundred sixty-seven thousand, eight hundred forty-seven
reais
and one
centavo
), represented by 1,797,069,689 (one billion, seven hundred ninety-seven million, sixty-nine thousand, six hundred eighty-nine) shares, consisting of
598,999,380 (five hundred ninety-eight million, nine hundred ninety-nine thousand, three hundred eighty) registered common shares and 1,198,070,309 (one billion, one hundred ninety-eight million, seventy thousand, three hundred nine) registered
preferred shares, without par value.”
CLAUSE EIGHT – REASONS FOR THE MERGER
8.1.
Reasons for the Merger
. The Merger is one of the steps of the Corporate Reorganization and the managements of the Oi Companies believe that
the Merger is an essential step of the Corporate Reorganization and that the Merger furthers the best interests of TNL, BRT and their shareholders, particularly through:
|
|
(i)
|
simplifying the corporate structure, which is currently extremely complex and includes three publicly-held companies with seven different classes of publicly traded
shares, and governance of the Oi Companies by consolidating the shareholder bases of the Oi Companies in one public company with two classes of shares that will be traded in Brazil and abroad;
|
|
|
(ii)
|
reduce operational, administrative and financial costs following the consolidation of the general management of the Oi Companies, the simplification of their capital
structure, and the improvement of their ability to attract investments and access the capital markets;
|
|
|
(iii)
|
aligning the interests of the shareholders of TNL and BRT;
|
|
|
(iv)
|
enhancing the liquidity of the shares issued by BRT; and
|
5
|
|
(v)
|
eliminating the costs of separate listings of the shares of TNL and BRT, as well as those costs arising from separately complying with the public disclosure
requirements applicable to TNL and BRT.
|
CLAUSE NINE – TYPES OF SHARES TO BE ISSUED TO THE COARI SHAREHOLDERS
9.1.
Shares to be Issued to the TNL Shareholders
. The holders of common shares of TNL will receive common shares of BRT and holders
of preferred shares of TNL will receive common and preferred shares of BRT, in order to maintain the required proportion between the common and preferred shares of BRT. The common and preferred shares of BRT to be distributed to the TNL shareholders
will entitle them to the same rights as those conferred by the other common shares and preferred shares of BRT, respectively, including full receipt of dividends and/or interest on shareholders’ equity that may be declared by BRT after the date
on which the Merger is approved.
CLAUSE TEN – WITHDRAWAL RIGHTS
10.1.
Withdrawal Rights of the Shareholders of TNL
. Pursuant to the provisions set forth in Article 137 of the Brazilian Corporation Law, shareholders of TNL that do not approve the Merger, through
dissent, abstention or not attending the extraordinary general shareholders’ meeting of TNL called to consider the Merger, are entitled to withdrawal rights, unless the shares owned by such shareholders possess liquidity and dispersal in the
market, under the terms of Article 137, II of the Brazilian Corporation Law. In order for the exercise the withdrawal rights to be effective, the shareholders of TNL must exercise their withdrawal rights with respect to the totality of the shares
owned by them at the time of the general shareholders’ meeting of TNL that approves the Merger.
10.1.1. Shareholders
owning TNL preferred shares will not have withdrawal rights, as those shares possess liquidity and dispersion in the market. Only shareholders owning TNL common shares will be entitled to withdrawal rights.
10.1.2. A shareholder of TNL must specifically express its intention to exercise its withdrawal rights within 30 (thirty) days after the
publication date of the minutes of the General Shareholders’ Meeting of TNL at which the Merger is approved.
10.2.
Value of
Reimbursement to TNL Shareholders
. Shareholders of TNL that dissent at the general shareholders’ meeting of TNL which will consider the Merger will have the right to be reimbursed for their TNL shares at the value of R$28.93 (twenty-eight
reais
and ninety-three
centavos
) per share, corresponding to the equity value of TNL as set forth on the balance sheet, dated as of June 30, 2011, to be approved at the extraordinary shareholders’ meeting that considers the
Merger.
10.2.1. Given that the Exchange Ratios proposed to the non-controlling shareholders of TNL for the Merger, as set
forth in Clause 3.1, is more favorable then the one resulting from the comparison of the net worth of TNL and BRT at market prices provided in the Appraisal Report on Net Worth at Market Prices, pursuant to the § 3 of Article 264 of the
Brazilian Corporation Law, the dissenting shareholders at the extraordinary general shareholders’ meeting of TNL called to consider the Merger will not be able to elect to receive a reimbursement value calculated based on the net worth at
market prices in exchange for their withdrawn shares, and will only be able to receive a reimbursement value based on the equity value of TNL as indicated above.
10.3.
Payment of Reimbursement
. The payment of the reimbursement value for the withdrawn shares will depend on the effective completion of the Merger, as set forth in Article 230 of the Brazilian
Corporation Law. In accordance with Article 137 of the Brazilian Corporation Law, the reimbursement of the value of the withdrawn shares will be assured only in respect of shares for which the shareholder was proven to be the owner at the close of
trading on May 24, 2011, the date of publication of the Statement of Material Fact announcing the Corporate Reorganization and the Merger and which have been owned by the shareholder uninterruptedly through the effective exercise of the right
of withdrawal.
6
10.4.
Rescission of the Merger
. Pursuant to Article 137 §3 of the Brazilian Corporation Law, in
the event that the amount to be paid to shareholders of TNL in connection with the exercise of withdrawal rights would, in the opinion of the management of BRT, jeopardize the financial stability of BRT, the Merger may be rescinded through a
proposal presented by the management of BRT.
CLAUSE ELEVEN – APPROVAL BY THE GENERAL SHAREHOLDERS’ MEETINGS OF TNL AND BRT
11.1.
General Shareholders’ Meetings
. In order to approve the Merger, general shareholders’ meetings of TNL and BRT will
be held to consider the Merger. The Merger will be considered by the same general shareholders’ meetings of BRT that will be held to consider the merger of Coari and BRT.
CLAUSE TWELVE – GENERAL PROVISIONS
12.1.
Cessation of Existence of TNL
. Upon
the effective completion of the Merger, TNL will cease to exist, and BRT will absorb all the assets, rights, goods, obligations and responsibilities of TNL.
12.2.
Auditing of the Financial Statements of TNL and BRT
. In compliance with Article 12 of CVM Instruction No. 319/99, the financial statements of TNL and BRT dated as of June 30, 2011
that served as the basis for the Merger were audited by Deloitte Touche Tohmatsu.
12.3.
Documents Available to the
Shareholders
. All the documents mentioned in this Protocol and Justification, as well as all the other documents already available at this moment, such as reports of the Independent Special Committees and of their advisors, will be available to
the respective TNL and BRT shareholders as required by applicable law and regulations, and may be reviewed by such shareholders at the following addresses: (i) Rua General Polidoro 99, 5
th
floor, Botafogo, City of Rio de Janeiro, State of Rio de Janeiro; and (ii) Rua Humberto de Campos 425, 5
th
floor (part), Leblon, City of Rio de Janeiro, State of Rio de
Janeiro. These documents will also be available at the websites of the CVM (
www.cvm.gov.br
), BM&FBOVESPA (
www.bmfbovespa.com.br
) and the Investor Relations websites of the Companies (
www.oi.net.br/ri
).
12.4.
Notification of the Merger to the Authorities
. The Merger is being analyzed by the Brazilian Telecommunications Industry Regulator
(“ANATEL”). Any other necessary communications related to the Merger will be submitted to the relevant government authorities in compliance with the governing law.
12.5.
Registration with the U.S. Securities and Exchange Commission (the “SEC”)
. We will file a registration statement with the SEC in connection with the Merger. As a result, the general
shareholders’ meetings that will consider the Merger will only be called after such registration statement has been declared effective by the SEC. At this moment, without adverse effects to the partial disclosure of some data and information
related to the Corporate Reorganization, the materials set forth in CVM Instruction No. 481/09 and CVM Instruction No. 319/99, including the Material Fact provided for in CVM Instruction No. 319/99, will also be fully disclosed.
12.6.
Approval of the Corporate Reorganization
. The Corporate Reorganization assumes the share exchange between TMAR and Coari and the
mergers of both Coari and TNL into BRT will occur on the same date, together and inseparable one from the others, and as a result, the completion of each of these transactions, including the Merger, will be conditioned on the approval of the other
transactions.
12.7.
Survival of Valid Clauses
. Should any clause, provision, term or condition of this Protocol and Justification be
deemed invalid, the other clauses, provisions, terms and conditions hereof will not be adversely affected by such invalidation.
12.8.
Election of Courts of Law
. The Central Law Court of the Rio de Janeiro State Court District is hereby elected to settle all issues arising from this Protocol and Justification, waiving any other, no matter how much more privileged it may be.
(rest of the page intentionally left blank)
7
BEING IN FULL AND FAIR AGREEMENT, the Parties sign this Protocol and Justification in 3 (three) copies of
identical form and content for one single purpose, together with the two undersigned witnesses.
Rio de Janeiro, August 26,
2011.
TELE NORTE LESTE PARTICIPAÇÕES S.A.
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/s/ Francisco Tosta Valim Filho
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/s/ Maxim Medvedovsky
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Name: Francisco Tosta Valim Filho
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Name: Maxim Medvedovsky
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Position: Chief Executive Officer
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Position: Officer
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BRASIL TELECOM S.A.
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/s/ Francisco Tosta Valim Filho
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/s/ Maxim Medvedovsky
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Name: Francisco Tosta Valim Filho
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Name: Maxim Medvedovsky
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Position: Chief Executive Officer
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Position: Officer
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Witnesses:
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/s/ Carolina Ohana Marques da Cunha
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/s/ Andrea Gerlach Lima de Alencar
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Name: Carolina Ohana Marques da Cunha
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Name: Andrea Gerlach Lima de Alencar
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Identity Card No:
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Identity Card No:
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8
Annex 4.1
Equity Appraisal Report
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REPORT:
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RJ-0375/11-04
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BASE DATE:
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June 30, 2011
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REQUESTING PARTY:
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BRASIL TELECOM S.A.
, with its head office located at Rua General Polidoro, nº 99, 5º andar (parte), in Botafogo, in the city and state of Rio de Janeiro,
registered with the General Roster of Corporate Taxpayers (CNPJ) under No. 76.535.764/0001-43, hereinafter referred to as
BRT.
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OBJECT:
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TELE NORTE LESTE PARTICIPAÇÕES S.A.
, with its head office located at Rua Humberto de Campos, nº.425, 8º andar, Leblon, city of Rio de Janeiro, RJ,
registered with the General Roster of Corporate Taxpayers (CNPJ) under number 02.558.134/0001-58, hereinafter referred to as
TNL.
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PURPOSE:
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To assess the book value of TNL shares in connection with the merger of TNL with and into BRT, pursuant to Law No. 6,404, of Dec/15/1976 (Corporate Law).
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TABLE OF CONTENTS
1.
INTRODUCTION
APSIS CONSULTORIA EMPRESARIAL Ltda., hereinafter referred to as APSIS, with its head office located at Rua da
Assembléia, No. 35, 12th floor, in the City and State of Rio de Janeiro, registered with the General Roster of Corporate Taxpayers (CNPJ) under No 08.681.365/0001-30, was appointed to assess the book value of TNL shares in connection
with the merger of TNL with and into BRT, pursuant to Law No. 6,404 of 12/15/1976 (Corporate Law).
In preparing this report, we used
data and information provided by third parties, in the form of documents and verbal interviews with the client. Estimates used in this process are based on documents and information which include, among others, the following:
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Balance Sheet of TNL as of June 30, 2011.
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APSIS has recently performed appraisals for publicly-held companies, for various purposes, of the following companies:
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AMÉRICA LATINA LOGÍSTICA DO BRASIL S/A
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ESTA-EMPRESA SANEADORA TERRITORIAL AGRÍCOLA S/A.
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GEODEX COMMUNICATIONS DO BRASIL S/A
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L.R. CIA.BRAS.PRODS.HIGIENE E TOUCADOR S/A
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LIGHT SERVIÇOS DE ELETRICIDADE S/A
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TAM TRANSPORTES AÉREOS MERIDIONAL S/A
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The
APSIS team in charge of preparing this report comprises the following professionals:
Project manager
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ANA CRISTINA FRANÇA DE SOUZA
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Civil engineer
Post-graduate in Accounting Sciences (CREA/RJ
91.1.03043-4)
Project manager
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CESAR DE FREITAS SILVESTRE
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Accountant (CRC/RJ 44779/O-3)
Accountant (CRC/RJ 022016-O-9)
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LUIZ PAULO CESAR SILVEIRA
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Mechanical engineer
Master of Business Management (CREA/RJ
89.1.00165-1)
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MARGARETH GUIZAN DA SILVA OLIVEIRA
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Civil engineer (CREA/RJ 91.1.03035-3)
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RICARDO DUARTE CARNEIRO MONTEIRO
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Civil engineer
Post-graduate in Economic Engineeering (CREA/RJ
30137-D)
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SÉRGIO FREITAS DE SOUZA
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Economist (CORECON/RJ 23521-0)
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WASHINGTON FERREIRA BRAGA
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Accountant (CRC/RJ 024.100-6 / CVM 6734)
2. PRINCIPLES
AND QUALIFICATIONS
This report strictly complies with the fundamental principles described below:
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The consultants and appraisers do not have any direct or indirect interest in the companies involved or in the merger, nor are there any other relevant
circumstances which may characterize a conflict of interest.
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To the best of the consultants’ knowledge and belief, the analyses, opinions and conclusions expressed in this Report are based on data,
diligence, research and surveys that are true and correct.
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The report presents all the limiting conditions imposed by the adopted methodologies, which affect the analyses, opinions and conclusions contained
therein.
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APSIS professional fees are not in any way whatsoever subject to the conclusions of this report.
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APSIS assumes full responsibility for the matter of Appraisal Engineering, including implicit appraisals, and for the exercise of its honorable duties,
primarily established in the appropriate laws, codes or regulations.
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In this report, it is assumed that the information received from third parties is correct, and the sources thereof are contained in this Report.
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This Report was prepared by APSIS and no one other than the consultants themselves prepared the analyses and respective conclusions.
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For projection purposes, we start with the premise of the inexistence of liens or encumbrances of any nature, whether judicial or extrajudicial,
affecting the companies in question, other than those listed in this Report.
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This Report complies with the specifications and criteria prescribed by USPAP (Uniform Standards of Professional Appraisal Practice), in addition to
the requirements imposed by different bodies and regulations, where applicable, such as: Finance Ministry, the Central Bank of Brazil, Banco do Brasil, CVM (Brazilian Securities and Exchange Commission), SUSEP (Superintendence of Private Insurance),
RIR (Income Tax Regulations), etc.
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The managers of the companies involved did not direct, restrict, hinder or take any actions which have or may have compromised access to, use or
knowledge of information, assets, documents, or work methods applicable to the quality of the respective conclusions contained herein.
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3.
RESPONSIBILITY LIMITS
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To prepare this report, APSIS used historic data and information, audited by third parties or unaudited, and unaudited projected data provided in
writing or verbally by the company’s management or obtained from the sources mentioned. Therefore, APSIS has assumed as true the data and information obtained for this report and does not have any responsibility in connection with its
truthfulness.
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The scope of this work did not include an audit of the financial statements or a revision of the work performed by the company’s auditors.
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Our work was developed for use by the requesting party in connection with the previously described objectives.
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We do not take responsibility for occasional losses to the requesting party or to other parties as a result of the use of data and information provided
by the company and contained herein.
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4. APPRAISAL
METHODOLOGY
Analysis of the previously mentioned supporting documents designed to ascertain whether bookkeeping was accurately conducted
and was in compliance with the legal, regulatory, normative, statutory and contractual provisions which govern the matter, within the scope of “Generally Accepted Accounting Principles and Conventions”.
We examined the balance sheet of TNL, as well as all other documents required for the preparation of this report, which was prepared on the basis of
TNL’s balance sheet for the period ending June 30, 2011.
It was ascertained that the assets and liabilities of TNL have been duly
accounted for.
5. NET EQUITY
APPRAISAL
We examined the accounting books of TNL, as well as all other documents required for the preparation of this report.
The experts have ascertained that the book net equity value of TNL in connection with the merger of TNL with and BRT is equivalent to R$ 8,426,204,248.24
(eight billion, four hundred twenty six million, two hundred four thousand, two hundred forty eight reais and twenty four centavos), as of June 30, 2011.
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TELE NORTE LESTE PARTICIPAÇÕES S.A.
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ACCOUNTING STATEMENT
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BALANCE SHEET - (THOUSAND REAIS)
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BALANCE AS OF
6/30/2011
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SUBSEQUENT
EVENT (1)
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SUBSEQUENT
EVENT (2)
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SUBSEQUENT
EVENT (3)
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SUBSEQUENT
EVENT (4)
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PRO FORMA
BALANCE
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CURRENT ASSETS
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548,642,268.63
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0.00
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0.00
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0.00
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0.00
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548,642,268.63
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LONG TERM ASSETS
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435,171,144.72
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0.00
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0.00
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0.00
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0.00
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435,171,144.72
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PERMANENT
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14,665,508,200.90
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-6,288,859.02
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0.00
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3,682,530,666.38
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-8,774,178,091.08
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9,567,571,917.18
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INVESTMENTS
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14,656,413,352.87
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-6,288,859.02
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0.00
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3,682,530,666.38
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-8,774,178,091.08
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9,558,477,069.15
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- Telemar Norte Leste S.A.
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14,641,943,503.41
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-215,156,850.35
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-14,426,786,653.06
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0.00
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0.00
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0.00
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- Coari Participações S.A.
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0.00
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208,867,991.33
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14,426,786,653.06
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-14,635,654,644.39
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0.00
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0.00
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- Brasil Telecom S.A.
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0.00
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0.00
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0.00
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18,318,185,310.77
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-8,774,178,091.08
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9,544,007,219.69
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- Outros Investimentos
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14,469,849.46
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0.00
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0.00
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0.00
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0.00
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14,469,849.46
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FIXED ASSETS
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8,021,367.03
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0.00
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0.00
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0.00
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0.00
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8,021,367.03
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INTANGIBLE ASSETS
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1,073,481.00
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0.00
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0.00
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0.00
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0.00
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1,073,481.00
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TOTAL ASSETS
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15,649,321,614.25
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-6,288,859.02
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0.00
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3,682,530,666.38
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-8,774,178,091.08
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10,551,385,330.53
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CURRENT LIABILITIES
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1,710,173,268.87
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0.00
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0.00
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0.00
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0.00
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1,710,173,268.87
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Loans and Financing
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1,508,203,674.09
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0.00
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0.00
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0.00
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0.00
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1,508,203,674.09
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Other Current Liabilities
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201,969,594.78
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0.00
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0.00
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0.00
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0.00
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201,969,594.78
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LONG TERM LIABILITIES
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415,007,813.42
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0.00
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0.00
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0.00
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0.00
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415,007,813.42
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Loans and Financing
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219,839,961.14
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0.00
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0.00
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0.00
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0.00
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219,839,961.14
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Other Non-Current Liabilities
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195,167,852.28
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0.00
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0.00
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0.00
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0.00
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195,167,852.28
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EQUITY
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13,524,140,531.96
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-6,288,859.02
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0.00
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3,682,530,666.38
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-8,774,178,091.08
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8,426,204,248.24
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Capital
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7,254,681,880.33
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0.00
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0.00
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0.00
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0.00
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7,254,681,880.33
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Capital Reserves Available
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1,202,403,601.05
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0.00
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0.00
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0.00
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0.00
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1,202,403,601.05
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Non-available Capital Reserves
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116,708,230.39
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0.00
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0.00
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0.00
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0.00
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116,708,230.39
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Distributable Profit Reserves
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6,358,816,665.17
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0.00
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0.00
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0.00
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0.00
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6,358,816,665.17
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Non-Distributable Profit Reserves
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451,256,467.60
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0.00
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0.00
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0.00
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0.00
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451,256,467.60
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Treasury Stocks
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-352,641,649.99
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0.00
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0.00
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0.00
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0.00
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-352,641,649.99
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Equity Valuation Adjustments
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-1,535,251,542.82
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0.00
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0.00
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3,682,530,666.38
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-8,774,178,091.08
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-6,626,898,967.52
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Net Income
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28,166,880.23
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-6,288,859.02
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0.00
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0.00
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0.00
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21,878,021.21
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TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
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15,649,321,614.25
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-6,288,859.02
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0.00
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3,682,530,666.38
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-8,774,178,091.08
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10,551,385,330.53
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- Net Book Equity Value for TNL
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R$ 8,426,204,248.24
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- TNL Investments in shares of BRT
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-R$ 9,544,007,219.69
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- Net Book Equity Value to be incorporated in BRT
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-R$ 1,117,802,971.45
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(1)
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Incorporation of the portion of the shareholders’ equity of TMAR which was split-off.
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(2)
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Represents the share exchange between TMAR and COARI.
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(3)
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Incorporation of the net book equity value of COARI - Confirmed in Report RJ_0375_11_03.
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(4)
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Represents reversal of negative goodwill recorded as a result of the acquisition of Brasil Telecom in January
2009 for a purchase price which was less than the book value of its assets.
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6. CONCLUSION
Considering the verifications performed on the previously mentioned documents and based on APSIS’ analyses, the experts have
concluded that the book net equity value of
TNL,
in connection with the merger of TNL with and into
BRT,
is equivalent to R$
8,426,204,248.24
(eight billion, four hundred twenty six million, two hundred four thousand, two
hundred forty eight reais and twenty four centavos). Considering that the net assets merged into BRT will be represented by shares of stock of BRT owned by TNL; therefore, the net assets to be merged into BRT will result in a reduction of BRT’s
capital of
R$ 1,117,802,971.45
(one billion, one hundred seventeen million, eight hundred two thousand, nine hundred seventy one reais and forty five centavos), as of June 30, 2011.
Having concluded Report
RJ-0375/11-04
, which consists of 10 (ten) pages typed on one side and 02 (two) attachments and reproduced in 03 (three)
original counterparts, APSIS Consultoria Empresarial Ltda., CRC/RJ 005112/0-9 and CORECON/RJ RF/2.052-4, a company specializing in the appraisal of assets, legally represented by the signatories below, makes itself available for any clarifications
which may be necessary.
Rio de Janeiro, August 12, 2011.
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LUIZ PAULO CESAR SILVEIRA
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BETINA DENGLER
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WASHINGTON FERREIRA BRAGA
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Director
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Project Manager
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Accountant (CRC/RJ 024.100-6 / CVM 6734)
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7. LIST OF
ATTACHMENTS
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2.
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GLOSSARY AND APSIS’ PROFILE
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SÃO PAULO - SP
Alameda Franca, 1467 n° 44
Jardim Paulista, CEP: 01422-001
Tel.: + 55 11 2626.0510 Fax: + 55 11 3061-5879
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RIO DE JANEIRO - RJ
Rua da Assembleia, nº 35, 12º andar
Centro, CEP: 20011-001
Tel.: + 55 21 2212.6850
Fax: + 55 21 2212.6851
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ATTACHMENT 1
TNL PRO-FORMA BALANCE SHEET
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BALANCE AS
OF 06/30/2011
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TMAR SPLIT-
OFF
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ACQUISITION
OF THE SPLIT-
OFF PORTION
OF TMAR BY
COARI
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SHARE
EXCHANGE
BETWEEN
TMAR AND
COARI
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MERGER OF
COARI INTO
BRT
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PRO-FORMA
BALANCE
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PREPARATION FOR
THE MERGER INTO
BRT
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|
|
NET ASSETS FOR
MERGER INTO BRT
|
|
|
11 - CURRENT
|
|
|
548,642,268.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
548,642,268.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
548,642,268.63
|
|
|
|
|
|
|
|
548,642,268.63
|
|
|
|
|
|
|
|
|
|
|
|
|
12 - NON-CURRENT
|
|
|
15,279,468,286.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current-assets
|
|
|
15,100,679,345.62
|
|
|
|
|
|
|
|
(6,288,859.02
|
)
|
|
|
|
|
|
|
3,682,530,666.38
|
|
|
|
18,776,921,152.98
|
|
|
|
(8,774,178,091.08
|
)
|
|
|
10,002,743,061.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.2 - INVESTMENTS
|
|
|
14,656,413,352.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.2.0 - EQUITY VALUATION
|
|
|
14,648,781,473.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13110002 - INVESTMENTS TMAR
|
|
|
14,641,943,503.41
|
|
|
|
|
|
|
|
(215,156,850.35
|
)
|
|
|
(14,426,786,653.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13110031 - INVESTMENTS COARI PART.
|
|
|
|
|
|
|
|
|
|
|
208,867,991.33
|
|
|
|
14,426,786,653.06
|
|
|
|
(14,635,654,644.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13110052 - INVESTMENTS BRT S.A.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,544,007,219.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13110062 - INVESTMENTS BRT W/OUT ADJUSTMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,301,573,725.79
|
|
|
|
|
|
|
|
(6,301,573,725.79
|
)
|
|
|
|
|
|
13110063 - INVESTMENTS BRT GAIN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,472,604,365.29
|
|
|
|
|
|
|
|
(2,472,604,365.29
|
)
|
|
|
|
|
|
12.2.1 - COST METHOD VALUATION
|
|
|
10,775,264.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.2.2 - GOODS FOR CULTURAL ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
14,656,413,352.87
|
|
|
|
|
|
|
|
(6,288,859.02
|
)
|
|
|
|
|
|
|
3,682,530,666.38
|
|
|
|
18,332,655,160.23
|
|
|
|
(8,774,178,091.08
|
)
|
|
|
9,558,477,069.15
|
|
|
Investments in TMAR
|
|
|
14,641,943,503.41
|
|
|
|
(215,156,850.35
|
)
|
|
|
|
|
|
|
(14,426,786,653.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in TMAR ceded
|
|
|
|
|
|
|
215,156,850.35
|
|
|
|
(215,156,850.35
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Coari
|
|
|
|
|
|
|
|
|
|
|
208,867,991.33
|
|
|
|
14,426,786,653.06
|
|
|
|
(14,635,654,644.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in BrT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,318,185,310.77
|
|
|
|
18,318,185,310.77
|
|
|
|
(8,774,178,091.08
|
)
|
|
|
9,544,007,219.69
|
|
|
Investments in other subsidiaries
|
|
|
6,837,970.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,837,970.27
|
|
|
|
|
|
|
|
6,837,970.27
|
|
|
Other investments
|
|
|
7,631,879.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,631,879.19
|
|
|
|
|
|
|
|
7,631,879.19
|
|
|
Other non-current assets
|
|
|
435,171,144.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
435,171,144.72
|
|
|
|
|
|
|
|
435,171,144.72
|
|
|
Fixed Assets
|
|
|
8,021,367.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,021,367.03
|
|
|
|
|
|
|
|
8,021,367.03
|
|
|
Intangible Assets
|
|
|
1,073,481.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,073,481.00
|
|
|
|
|
|
|
|
1,073,481.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
15,649,321,614.25
|
|
|
|
|
|
|
|
(6,288,859.02
|
)
|
|
|
|
|
|
|
3,682,530,666.38
|
|
|
|
19,325,563,421.61
|
|
|
|
(8,774,178,091.08
|
)
|
|
|
10,551,385,330.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TNL PRO-FORMA BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS
OF 06/30/2011
|
|
|
TMAR SPLIT-
OFF
|
|
ACQUISITION
OF THE SPLIT-
OFF PORTION
OF TMAR BY
COARI
|
|
|
SHARE
EXCHANGE
BETWEEN
TMAR AND
COARI
|
|
MERGER OF COARI
INTO BRT
|
|
|
PRO-FORMA
BALANCE
|
|
|
PREPARATION FOR
THE MERGER INTO
BRT
|
|
|
NET ASSETS FOR
MERGER INTO BRT
|
|
|
21 - CURRENT
|
|
|
1,710,173,268.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.5 - LOANS AND FINANCING
|
|
|
(9,031,688.64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.6 - HEDGING TRANSACTIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.7 - DEBENTURES
|
|
|
1,517,235,362.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
1,710,173,268.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,710,173,268.87
|
|
|
|
|
|
|
|
1,710,173,268.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing
|
|
|
1,508,203,674.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,508,203,674.09
|
|
|
|
|
|
|
|
1,508,203,674.09
|
|
|
Other current liabilities
|
|
|
201,969,594.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
201,969,594.78
|
|
|
|
|
|
|
|
201,969,594.78
|
|
|
22 - LONG-TERM LIABILITIES
|
|
|
415,007,813.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.3 - LOANS AND FINANCING
|
|
|
219,839,961.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.4 - DEBENTURES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.5 - HEDGING TRANSACTIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Liabilities
|
|
|
415,007,813.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
415,007,813.42
|
|
|
|
|
|
|
|
415,007,813.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing
|
|
|
219,839,961.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
219,839,961.14
|
|
|
|
|
|
|
|
219,839,961.14
|
|
|
Other non-current liabilities
|
|
|
195,167,852.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195,167,852.28
|
|
|
|
|
|
|
|
195,167,852.28
|
|
|
23 - SHAREHOLDERS EQUITY
|
|
|
13,702,947,473.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
13,524,140,531.96
|
|
|
|
|
|
(6,288,859.02
|
)
|
|
|
|
|
3,682,530,666.38
|
|
|
|
17,200,382,339.32
|
|
|
|
(8,744,178,091.08
|
)
|
|
|
8,456,204,248.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.0 - SHARE CAPITAL
|
|
|
7,254,681,880.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29110000 - COMMON SHARES
|
|
|
2,998,091,532.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,202,403,601.05
|
|
|
1,202,403,601.05
|
|
1,202,403,601.05
|
|
1,202,403,601.05
|
|
|
1,202,403,601.05
|
|
|
1,202,403,601.05
|
|
|
1,202,403,601.05
|
|
|
29110100 - PREFERRED SHARES
|
|
|
4,256,590,347.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
7,254,681,880.33
|
|
|
|
|
|
|
|
|
|
7,254,681,880.33
|
|
|
|
|
|
7,254,681,880.33
|
|
|
23.1.0 - CAPITAL RESERVES
|
|
|
1,319,111,831.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210000 - GOODWILL
|
|
|
1,172,054,945.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210020 - GOODWILL RESERVE – SALE
|
|
|
6,060,576.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210110 - DONATIONS AND SUBSIDIES - OTHERS
|
|
|
795,009.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210400 - OTHER CAPITAL RESERVES
|
|
|
24,288,078.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29510000 - COMPENSATION BASED ON SHARES
|
|
|
13,738,559.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29510010 - REFLEXIVE REM. RESERVES BASED ON SHARES
|
|
|
102,174,660.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available capital reserves
|
|
|
1,202,403,601.05
|
|
|
|
|
|
|
|
|
|
1,202,403,601.05
|
|
|
|
|
|
1,202,403,601.05
|
|
|
Non-available capital reserves
|
|
|
116,708,230.39
|
|
|
|
|
|
|
|
|
|
116,708,230.39
|
|
|
|
|
|
116,708,230.39
|
|
|
23.1.2 - PROFIT RESERVES
|
|
|
6,810,073,132.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220000 - LEGAL RESERVE
|
|
|
451,256,467.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220040 - INVESTMENT RESERVE
|
|
|
6,358,816,665.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributable profit reserves
|
|
|
6,358,816,665.17
|
|
|
|
|
|
|
|
|
|
6,358,816,665.17
|
|
|
|
|
|
6,358,816,665.17
|
|
|
Non-distributable profit reserves
|
|
|
451,256,467.60
|
|
|
|
|
|
|
|
|
|
451,256,467.60
|
|
|
|
|
|
451,256,467.60
|
|
|
23.4 - SHARES IN TREASURY
|
|
|
(352,641,649.99
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29410000 - COMMON SHARES
|
|
|
(84,386,498.81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,202,403,601.05
|
|
|
1,202,403,601.05
|
|
|
1,202,403,601.05
|
|
|
1,202,403,601.05
|
|
|
1,202,403,601.05
|
|
|
|
1,202,403,601.05
|
|
|
|
1,202,403,601.05
|
|
|
|
1,202,403,601.05
|
|
|
29420000 – PREFERRED SHARES
|
|
|
(268,255,151.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares in treasury
|
|
|
(84,386,498.81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(84,386,498.81
|
)
|
|
|
|
|
|
|
(84,386,498.81
|
)
|
|
Preferred shares in treasury
|
|
|
(268,255,151.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(268,255,151.18
|
)
|
|
|
|
|
|
|
(268,255,151.18
|
)
|
|
23.5 - EQUITY VALUATION ADJUSTMENTS
|
|
|
(1,535,251,542.82
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610100 - DERIVATIVES TRANSACTIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610110 - GOODWILL - CAPITAL TRANSACTIONS
|
|
|
(1,442,615,425.34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610120 - ADDITIONAL PAID-IN CAPITAL
|
|
|
573,747,882.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610130 - RESERVE - HEDGE ACCOUNT
|
|
|
(3,697,695.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610140 - VARIATION IN INVESTMENT PARTICIPATION
|
|
|
(503,468,485.73
|
)
|
|
|
|
|
|
|
|
|
|
|
3,682,530,666.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610150 - VARIATION IN FINANCIAL ASSETS
|
|
|
(159,217,819.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity valuation adjustments
|
|
|
(1,535,251,542.82
|
)
|
|
|
|
|
|
|
|
|
|
|
3,682,530,666.38
|
|
|
|
2,147,279,123.56
|
|
|
|
(8,774,178,091.08
|
)
|
|
|
(6,626,898,967.52
|
)
|
|
29310000 - ACCUMULATED GAIN (LOSS)
|
|
|
(3,907,121,698.83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29310010 - GAIN (LOSS) FOR THE PERIOD
|
|
|
3,907,121,698.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.3 - GAIN (LOSS) FOR THE PERIOD
|
|
|
206,973,821.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results for the period
|
|
|
28,166,880.23
|
|
|
|
|
|
(6,288,859.02
|
)
|
|
|
|
|
|
|
|
|
21,878,021.21
|
|
|
|
|
|
|
|
21,878,021.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders’ Equity
|
|
|
15,649,321,614.25
|
|
|
|
|
|
(6,288,859.02
|
)
|
|
|
|
|
3,682,530,666.38
|
|
|
|
19,325,563,421.61
|
|
|
|
(8,774,178,091.08
|
)
|
|
|
10,551,385,330.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATTACHMENT 2
ABL - Gross Leasable Area
ABNT - Brazilian Technical Standards Association
Allocated Codes - serial number (grades or
weights) to differentiate the quality features of properties.
Allotment - subdivision of a tract of land into lots for buildings with the
opening of new thoroughfares, or the extension, modification or expansion of existing ones.
Amortization - systematic allocation of the
depreciable value of an asset over its useful life.
Apparent Age - estimated age of a property according to its characteristics and
conservation status at the time of inspection.
Asset - a resource controlled by the entity as a result of past events from which future
economic benefits are expected for the entity.
Asset Approach - valuation of companies where all assets (including those not accounted for)
have their values adjusted to the market. Also known as market net equity.
Base Date - specific date (day, month and year) of application of
the assessment value.
Basic Infrastructure - urban rainwater drainage equipment, street lighting, sewage system, drinking water, public and
home electricity supply and access routes.
BDI - a percentage that indicates the benefits and overhead costs applied to the direct cost of
construction.
Best Use of the Property - the most economically appropriate use of a certain property according to its characteristics and
surroundings, respecting legal limitations.
Beta - a systematic risk measure of a share; price trend of a particular share to be correlated with
changes in a given index.
Book Value - the value at which an asset or liability is recognized on the balance sheet.
Building Standard - the quality of the improvements according to the specifications of design, materials, workmanship and performance effectively used in
construction.
Business Combination - union of separate entities or businesses producing financial statements of a single reporting entity.
Transaction or other event by which an acquirer obtains control of one or more businesses, regardless of the legal form of operation.
Business Risk - uncertainty of realization of expected future returns of the business resulting from factors other than financial leverage.
CAPEX (Capital Expenditure) - fixed asset investments.
Capitalization - conversion of a simple period of economic benefits into value.
CAPM (Capital
Asset Pricing Model) - model in which the capital cost for any share or lot of shares equals the risk free rate plus risk premium provided by the systematic risk of the share or lot of shares under investigation. Generally used to calculate the Cost
of Equity or the Cost of Shareholder Capital.
Capitalization Rate - any divisor used to convert economic benefits into value in a single
period.
Capital Structure - composition of a company’s invested capital, between own capital (equity) and third-party capital (debt).
Cash Flow - cash generated by an asset, group of assets or business during a given period of time. Usually the term is supplemented by a
qualification referring to the context (operating, non-operating, etc...).
Cash Flow on Invested Capital - cash flow generated by the company to be reverted to lenders (interest and
amortizations) and shareholders (dividends) after consideration of cost and operating expenses and capital investments.
Cash-Generating Unit
- smallest identifiable group of assets generating cash inflows that are largely independent on inputs generated by other assets or groups of assets.
Casualty - an event that causes financial loss.
Company - commercial or industrial entity,
service provider or investment entity holding economic activities.
Conservation Status - physical status of an asset in result of its
maintenance.
Control - power to direct the strategic policy and administrative management of a company.
Control Premium - value or percentage of the pro-rata value of a lot of controlling shares over the pro-rata value of non-controlling shares, which
reflect the control power.
Cost - the total direct and indirect costs necessary for production, maintenance or acquisition of an asset at a
particular time and situation.
Cost of Capital - Expected rate of return required by the market as an attraction to certain investment funds.
CPC - Accounting Pronouncements Committee.
Current Value - value replacement with a new value depreciated as a result of the physical state the property is in.
CVM - Securities and Exchange Commission.
Damage - damage caused to others by the occurrence of flaws, defects, accidents and crimes, among others.
Data Treatment - application of operations to express, in relative terms, the attribute differences between the market data and data of the property being assessed.
Date of Issue - closing date of the valuation report, when conclusions are conveyed to the client.
DCF (Discounted Cash Flow) - discounted cash flow.
D & A - depreciation and amortization.
Dependent Variable - variable to be explained by the
independent ones.
Depreciable Value - cost of the asset, or other amount that substitutes such cost (financial statements), less its residual
value
Depreciation - systematic allocation of the depreciable value of an asset during its useful life.
Dichotomous Variable - variable that assumes only two values.
Direct Production Cost - spending on inputs, including labor, in the production of goods.
Discount for Lack of Control - value or percentage deducted from the pro-rata value of 100% of the value of a company that reflects the absence of part
or all of the control.
Discount for Lack of Liquidity - value or percentage deducted from the pro-rata value of 100% of the value
of a company that reflects the lack of liquidity.
Discount Rate - any divisor used to convert a flow of future economic benefits into present
value.
Drivers - value drivers or key variables.
EBIT (Earnings before Interest and Taxes) - earnings before interest and taxes.
EBITDA (Earnings
before Interest, Taxes, Depreciation and Amortization) - earnings before interest, taxes, depreciation and amortization.
Economic Benefits -
benefits such as revenue, net profit, net cash flow, etc.
Efficient Use - that which is recommendable and technically possible for the
location on a reference date, among the various uses permitted by the applicable law, observing surrounding marketing trends.
Electrical
Damage Value - estimated cost of the repair or replacement of parts, when the property suffers electrical damage. Values are tabulated in percentages of the Replacement Value and have been calculated through the study of equipment manuals and the
expertise in corrective maintenance of Apsis technicians.
Enterprise - set of properties capable of producing revenue through marketing or
economic exploitation. It can be: real estate (e.g. subdivision, commercial / residential buildings), real-estate based (e.g., hotel, shopping mall, theme parks), industrial or rural.
Enterprise Value - economic value of the company.
Equity Value - economic value of the equity.
Equivalent Construction Area - constructed area on which the unit cost equivalence of corresponding construction is applied, according to
ABNT postulates.
Equivalent Depth - numerical result of the division of a lot area by its main projected front.
Expertise - technical activity performed by a professional with specific expertise to investigate and clarify facts, check the status of property,
investigate the causes that motivated a particular event, appraise assets, their costs, results or rights.
Facilities - set of materials,
systems, networks, equipment and operational support services for a single machine, production line or plant, according to the degree of aggregation.
Fair Market Value - value at which an asset could have its ownership exchanged between a potential seller and a potential buyer, when both parties have reasonable knowledge of relevant facts and neither
is under pressure to do so.
Fair Value Less Cost to Sell - value that can be obtained from the sale of an asset or cash-generating unit less
sale expenses, in a transaction between knowledgeable, willing and uninterested parties.
FCFF (Free Cash Flow to Firm) - Free cash flow to
firm, or unlevered free cash flow.
Financial Lease - that which substantially transfers all the risks and benefits related to the ownership
of the asset, which may or may not eventually be transferred. Leases that are not financial leases are classified as operating leases.
Fixed
Asset - tangible asset available for use in the production or supply of goods or services, in third-party leasing, investments, or for management purposes, expected to be used for more than one accounting period.
Flaw - anomaly that affects the performance of products and services, or makes them inadequate to the purposes intended, causing inconvenience or
material loss to the consumer.
Forced Liquidation - condition on the possibility of a compulsory sale or in a shorter period than the
average absorption by the market.
Free Float - percentage of outstanding shares on the company’s total capital.
Frontage - horizontal projection of the line dividing the property and the access road; measurement of the front of a building.
Goodwill - see Goodwill based on the expectation of future profitability (goodwill).
Homogenization - treatment of observed prices by application of mathematical transformations that express, in relative terms, the differences between market data attributes and those of the property
assessed.
Homogenized Area - useful or private area, or built with mathematical treatments for valuation purposes, according to criteria
based on the real estate market.
IAS (International Accounting Standards) - International Accounting Standards.
IASB (International Accounting Standards Board) - International Accounting Standards Board.
Ideal Fraction - percentage owned by each of the buyers (tenants) of the land and of the building’s common items.
IFRS (International Financial Reporting Standards) - International Financial Reporting Standards, a set of international accounting pronouncements published and reviewed by the IASB.
Impairment - see Losses on devaluation
Impairment Losses (impairment) - book value of the asset that exceeds, in the case of
stocks, its selling price less the cost to complete it and expense of selling it; or, in the case of other assets, their fair value less expenditure for sale.
Income Approach - valuation method for converting the present value of expected economic benefits.
Independent Variables - variables that provide a logical content to the formation of the value of the property subject to the assessment.
Indirect Production Cost - administrative and financial costs, benefits and other liens and charges necessary for the production of goods.
Influence Point - atypical point that, when removed from the sample, significantly changes the estimated parameters or the linear structure of the model.
Insurance - risk transfer guaranteed by contract whereby one party undertakes, subject to payment of premium, to indemnify another for the
occurrence of casualties covered under the policy.
Insurance Value - value at which an insurance company assumes the risks, and does not
apply to the land and foundations, except in special cases.
Intangible Asset - identifiable non-monetary asset without physical substance.
This asset is identifiable when: it is separable, i.e., capable of being separated or divided from the entity and sold, transferred, licensed, leased or exchanged, either alone or together with the related contract, asset or liability; or originates
from contractual rights or other legal rights regardless of their being transferred, separable from the entity or from other rights and obligations.
Internal Rate of Return - discount rate where the present value of future cash flow is equivalent to the cost of investment.
International Accounting Standards - standards and interpretations adopted by the IASB. They include:
International Financial Reporting Standards (IFRS) International Accounting Standards (IAS) and interpretations developed by the Interpretation Committee on International Financial Reporting Standards (IFRIC) or by the former Standing
Interpretations Committee (SIC).
Invested Capital - the sum of own capital and third-party capital invested in a company. Third-party capital
is usually related to debt with interest (short and long-term) and must be specified within the context of the valuation.
Investment Property
- property (land, building or building part, or both) held by the owner or lessee under the lease, both to receive payment of rent and for capital appreciation or both, other than for: use in the production or supply of goods or services, as well as
for administrative purposes.
Investment Value - value for a particular investor based on individual interests in the property in question. In
the case of business valuation, this value can be analyzed by different situations, such as the synergy with other companies of an investor, risk perceptions, future performance and tax planning.
Key Money - amount paid by the prospective tenant for signature or transfer of the lease contract, as compensation for the point of sale.
Key Variables - variables that, a priori, and traditionally have been important for the formation of property value.
Levered Beta - beta value reflecting the debt in capital structure.
Liability - present obligation that arises from past events, whereby it is hoped that the settlement thereof will result in the inflow of funds from the entity embodying economic benefits.
Liquidation Value - value of a property offered for sale on the market outside the normal process, i.e. one that would be established if the property
were offered for sale separately, taking into account the costs involved and the discount required for a sale in a reduced period.
Liquidity
- ability to rapidly convert certain assets into cash or into the payment of a certain debt.
Market Approach - valuation method in which
multiple comparisons derived from the sales price of similar assets are adopted.
Market Data - set of information collected on the market
related to a particular property.
Marketing Factor - the ratio between the market value of an asset and its reproduction cost less
depreciation or replacement cost, which may be higher or lower than 1 (one).
Market Research - set of activities for identification, investigation, collection, selection, processing,
analysis and interpretation of results on market data.
Maximum Insurance Value - maximum value of the property for which it is recommendable
to insure it. This criterion establishes that the property whose depreciation is greater than 50% should have its Maximum Insurance Value equivalent to twice as much as the Current Value; and the property whose depreciation is with less than 50%
should have its Maximum Insurance Value equivalent to the Replacement Value.
Multiple - market value of a company, share or invested capital,
divided by a valuation measurement of the company (EBITDA, income, customer volume, etc...).
Net Debt - cash and cash equivalents, net
position in derivatives, short-term and long-term financial debts, dividends receivable and payable, receivables and payables related to debentures, short-term and long-term deficits with pension funds, provisions, and other credits and obligations
to related parties, including subscription bonus.
Non-Operating Assets - those not directly related to the company’s operations (may or may not generate
revenue) and that can be disposed of without detriment to its business.
Null hypothesis in a regression model - hypothesis in which one or a
set of independent variables involved in the regression model are not important to explain the variation of the phenomenon in relation to a pre-established significance level.
Operating Assets - assets that are basic to the company’s operations.
Operating Lease -
that which does not substantially transfer all the risks and benefits incidental to the ownership of the asset. Leases that are not operating leases are classified as financial leases.
Parent Company - an entity that has one or more subsidiaries.
Perpetual Value - value at the end
of the projective period to be added on the cash flow.
Point of Sale - intangible asset that adds value to commercial property, due to its
location and expected commercial exploitation.
Population - total market data of the segment to be analyzed.
Premium for Expected Future Profitability (goodwill) - future economic benefits arising from assets not capable of being individually identified or
separately recognized.
Present Value - the estimated present value of discounted net cash flows in the normal course of business.
Price - the amount by which a transaction is performed involving a property, a product or the right thereto.
Private Area - useful area plus building blocks (such as walls, pillars, etc.) and elevator hallway (in
specific cases).
Property - something of value, subject to use, or that may be the object of a right, which integrates an equity.
Qualitative Variables - variables that cannot be measured or counted, only ordered or ranked, according to attributes inherent to the property (e.g.,
building standard, conservation status and quality of the soil).
Quantitative Variables - variables that can be measured or counted (e.g.,
private area, number of bedrooms and parking spaces).
Range for Real Estate Valuations - range in the vicinity of the point estimator adopted
in the valuation within which to arbitrate the value of the property provided it is justified by the existence of features that are not contemplated in the model.
Re (Cost of Equity) - return required by shareholders for the capital invested.
Real Estate -
property, consisting of land and any improvements incorporated thereto. Can be classified as urban or rural, depending on its location, use or to its highest and best use.
Recoverable Value - the highest fair value of an asset (or cash-generating unit) minus the cost of sales compared with its value in use.
Rd (Cost of Debt) - a measure of the amount paid for the capital earned from third parties, in the form of loans, financing, market funding, among others.
Reference Real Estate - market data with features comparable to the property assessed.
Regression Model - the model used to represent a specific phenomenon, based on a sample, considering the
various influencing characteristics.
Remaining Life - Property’s remaining life.
Replacement Cost - a property’s reproduction cost less depreciation with the same function and features comparable to the property assessed.
Replacement Value for New - value based on what the property would cost (usually in relation to current market prices) to be replaced with or
substituted by a new, equal or similar property.
Reproduction Cost - expense required for the exact duplication of a property, regardless of
any depreciation.
Reproduction Cost Less Depreciation - a property’s reproduction cost less depreciation, considering the state it is
in.
Residual Value - value of new or used asset projected for a date limited to that in which it becomes scrap, considering its being in
operation during the period.
Residual Value of an Asset - estimated value that the entity would obtain at present with the sale of the asset,
after deducting the estimated costs thereof, if the asset were already at the expected age and condition at the end of its useful life.
Sample - set of market data representative of a population.
Scrap Value - market value of a property’s reusable materials in disabling conditions, without their being used for production purposes.
Shareholders’ Equity at Market Prices - see Assets Approach.
Statistical Inference - part
of statistical science that allows drawing conclusions about the population from a sample.
Subsidiary - entity, including that with no legal
character, such as an association, controlled by another entity (known as the parent company).
Supporting Documentation - documentation
raised and provided by the client on which the report premises are based.
Survey - evidence of local events through insightful observations
in a property and of the factors and conditions that constitute or influence it.
Tangible Asset - physically existing asset, such as land,
building, machinery, equipment, furniture and tools.
Technical Report - detailed report or technical clarification issued by a legally
qualified
and trained professional on a specific subject.
Total Construction Area - resulting
from the sum of the real private area and the common area allocated to an independent unit, defined according to ABNT.
Urbanizable Land -
land eligible to receive urban infrastructure works aiming at its efficient use, by means of the subdivision, split or implementation of a business.
Useful Area - real private area subtracted from the area occupied by walls and other building blocks that prevent or hinder its use.
Useful Economic Life - the period in which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset by the entity.
Valuation - act or process of determining the value of an asset.
Valuation Methodology - one or more approaches used in developing evaluative calculations for the indication of the value of an asset.
Value at Risk - representative value of the share of the property one wishes to insure and that may correspond to the maximum insurable value.
Value in Use - value of a property in operating conditions in its present state, such as the useful part of an industry, including, where
relevant, the costs of design, packaging, taxes, freight and installation.
Value Plan - the graphic representation or listing of generic
square meter values of land or of the real estate on the same date.
WACC (Weighted Average Cost of Capital) - model in which capital cost is
determined by the weighted average of the market value of capital structure components (own and others).
Annex 4.2
Net Worth Appraisal Report
At Market Prices
|
|
|
|
|
REPORT:
|
|
RJ-0375/11-07
|
|
|
|
|
BASE DATE:
|
|
June 30, 2011
|
|
|
|
|
REQUESTING PARTY:
|
|
BRASIL TELECOM S.A.,
with its head office located at Rua General Polidoro, No. 99, 5º andar (parte), in Botafogo, in the
city and state of Rio de Janeiro, registered with the General Roster of Corporate Taxpayers (CNPJ) under number 76.535.764/0001-43, hereinafter referred to as
BRT
; and
TELE NORTE LESTE PARTICIPAÇÕES S.A.,
with its head office
located at Rua Humberto de Campos, No.425, 8º andar, Leblon, in the city and state of Rio de Janeiro, registered with the General Roster of Corporate Taxpayers (CNPJ) under number 02.558.134/0001-58, hereinafter referred
TNL.
|
|
|
|
|
OBJECT:
|
|
BRT
and
TNL
, as described above.
|
|
|
|
|
PURPOSE:
|
|
Calculation of the Net Equity of both BRT and TNL, following the appraisal of the equity of each of these companies pursuant to the same criteria and as of the same date, at
market prices, for the purposes of article 264 of Law No. 6,404 of 12/15/1976 (Corporate Law).
|
EXECUTIVE SUMMARY
APSIS CONSULTORIA EMPRESARIAL Ltda. (“APSIS”) was hired by BRT and TNL to calculate the Net Equity of each of BRT and TNL, following the appraisal of the equity of each of these companies
pursuant to the same criteria and as of the same date, at market prices, for the purposes of article 264 of Law No. 6,404 of 12/15/1976 (Corporate Law).
The technical procedures used in this report are in accordance with the criteria set forth by appraisal standards. Appraisal calculations to assess the value of assets were devised on the basis of the
income, asset and market approaches.
This report presents the market values of the companies’ assets and liabilities used to adjust the
book Net Equity of each of BRT and TNL through asset approaches.
CORPORATE RESTRUCTURING OF OI GROUP: SUMMARY OF THE TRANSACTION
As described in the Statement of Material Fact published on May 24, 2011, Tele Norte Leste Participacoes SA (“TNL”), Telemar Norte Leste
SA (“Telemar”), Coari Participações SA (“Coari”) and Brasil Telecom SA (“BRT”), hereinafter together referred to as the OI COMPANIES, will implement a corporate restructuring (the “Corporate
Restructuring”) including the share exchange between TMAR and Coari and the mergers of Coari and TNL into BRT. As a result of the Corporate Restructuring, all current shareholders of the OI COMPANIES will become shareholders of BRT, which will
change its name to OI S.A. and will be the only one of the OI COMPANIES listed on a stock market.
The charts below show the simplified
corporate structure before and after the implementation of the Corporate Restructuring:
The following are the main steps of the Corporate Restructuring considered for adjustment in the financial
statements of the OI COMPANIES:
|
|
1.
|
Issuance and Redemption of shares by BRT;
|
|
|
2.
|
Share Exchange between TMAR and Coari;
|
|
|
3.
|
Merger of Coari into BRT;
|
|
|
4.
|
Merger of TNL into BRT.
|
SUMMARY OF RESULTS
The tables below present an overview of the Net Equity at market prices of the companies involved in the merger of TNL into BRT, as of the base date of this report:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASIL TELECOM S.A. (BRT)
|
|
FINANCIAL STATEMENTS
|
|
|
CONSOLIDATED BALANCE SHEETS (THOUSANDS REAIS)
|
|
BALANCE
AS
OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
20,127,453
|
|
|
|
-1,501,984
|
|
|
|
18,625,469
|
|
|
|
-627,662
|
|
|
|
17,997,807
|
|
|
LONG TERM ASSETS
|
|
|
17,099,149
|
|
|
|
0
|
|
|
|
17,099,149
|
|
|
|
0
|
|
|
|
17,099,149
|
|
|
INVESTMENTS
|
|
|
57,377
|
|
|
|
0
|
|
|
|
57,377
|
|
|
|
0
|
|
|
|
57,377
|
|
|
- Other Investments
|
|
|
57,377
|
|
|
|
0
|
|
|
|
57,377
|
|
|
|
0
|
|
|
|
57,377
|
|
|
FIXED ASSETS
|
|
|
19,740,948
|
|
|
|
0
|
|
|
|
19,740,948
|
|
|
|
11,033,315
|
|
|
|
30,774,263
|
|
|
INTANGIBLE ASSETS
|
|
|
3,467,445
|
|
|
|
0
|
|
|
|
3,467,445
|
|
|
|
0
|
|
|
|
3,467,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
60,492,372
|
|
|
|
-1,501,984
|
|
|
|
58,990,388
|
|
|
|
10,405,653
|
|
|
|
69,396,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
14,685,222
|
|
|
|
-1,501,984
|
|
|
|
13,183,238
|
|
|
|
0
|
|
|
|
13,183,238
|
|
|
NON-CURRENT LIABILITIES
|
|
|
30,150,559
|
|
|
|
0
|
|
|
|
30,150,559
|
|
|
|
3,537,922
|
|
|
|
33,688,481
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
37,486
|
|
|
|
0
|
|
|
|
37,486
|
|
|
|
16,443
|
|
|
|
53,929
|
|
|
EQUITY
|
|
|
15,619,105
|
|
|
|
0
|
|
|
|
15,619,105
|
|
|
|
6,851,288
|
|
|
|
22,470,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
60,492,372
|
|
|
|
-1,501,984
|
|
|
|
58,990,388
|
|
|
|
10,405,653
|
|
|
|
69,396,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued in the Corporate Restructuring.
|
A detailed description of the effects of the merger of TNL into BRT can be found in attachment 1.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
TELE NORTE LESTE PARTICIPAÇÕES S.A.
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE
AS
OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
548,642
|
|
|
|
0
|
|
|
|
548,642
|
|
|
|
0
|
|
|
|
548,642
|
|
|
LONG TERM ASSETS
|
|
|
435,171
|
|
|
|
0
|
|
|
|
435,171
|
|
|
|
-2,947
|
|
|
|
432,224
|
|
|
INVESTMENTS
|
|
|
18,332,655
|
|
|
|
-8,774,178
|
|
|
|
9,558,477
|
|
|
|
4,186,335
|
|
|
|
13,744,812
|
|
|
- Investments in subsidiaries:
|
|
|
18,325,023
|
|
|
|
-8,774,178
|
|
|
|
9,550,845
|
|
|
|
4,186,335
|
|
|
|
13,737,180
|
|
|
- Other Investments
|
|
|
7,632
|
|
|
|
0
|
|
|
|
7,632
|
|
|
|
0
|
|
|
|
7,632
|
|
|
FIXED ASSETS
|
|
|
8,021
|
|
|
|
0
|
|
|
|
8,021
|
|
|
|
0
|
|
|
|
8,021
|
|
|
INTANGIBLE ASSETS
|
|
|
1,073
|
|
|
|
0
|
|
|
|
1,073
|
|
|
|
0
|
|
|
|
1,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
19,325,562
|
|
|
|
-8,774,178
|
|
|
|
10,551,384
|
|
|
|
4,183,388
|
|
|
|
14,734,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
1,710,173
|
|
|
|
0
|
|
|
|
1,710,173
|
|
|
|
0
|
|
|
|
1,710,173
|
|
|
NON-CURRENT LIABILITIES
|
|
|
415,007
|
|
|
|
0
|
|
|
|
415,007
|
|
|
|
-1,002
|
|
|
|
414,005
|
|
|
EQUITY
|
|
|
17,200,382
|
|
|
|
-8,774,178
|
|
|
|
8,426,204
|
|
|
|
4,184,390
|
|
|
|
12,610,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
19,325,562
|
|
|
|
-8,774,178
|
|
|
|
10,551,384
|
|
|
|
4,183,388
|
|
|
|
14,734,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents reversal of negative goodwill recorded as a result of the acquisition of Brasil Telecom in January 2009 for a purchase price which was less than the
book value of its assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VALUE ( THOUSAND REAIS )
|
|
|
|
|
|
|
|
|
|
|
BRT X TNL
|
|
|
RELEVANT
ACCOUNTS
|
|
PRO FORMA BALANCE
|
|
|
ADJUSTED BALANCE
|
|
|
|
BRT
|
|
|
TNL
|
|
|
BRT
|
|
|
TNL
|
|
|
ASSETS
|
|
|
58,990,388
|
|
|
|
10,551,384
|
|
|
|
69,396,041
|
|
|
|
14,734,772
|
|
|
CURRENT ASSETS
|
|
|
18,625,469
|
|
|
|
548,642
|
|
|
|
17,997,807
|
|
|
|
548,642
|
|
|
LONG TERM ASSETS
|
|
|
17,099,149
|
|
|
|
435,171
|
|
|
|
17,099,149
|
|
|
|
432,224
|
|
|
FIXED ASSETS
|
|
|
23,265,770
|
|
|
|
9,567,571
|
|
|
|
34,299,085
|
|
|
|
13,753,906
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
58,990,388
|
|
|
|
10,551,384
|
|
|
|
69,396,041
|
|
|
|
14,734,772
|
|
|
CURRENT LIABILITIES
|
|
|
13,183,238
|
|
|
|
1,710,173
|
|
|
|
13,183,238
|
|
|
|
1,710,173
|
|
|
LONG TERM LIABILITIES
|
|
|
30,150,559
|
|
|
|
415,007
|
|
|
|
33,688,481
|
|
|
|
414,005
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
37,486
|
|
|
|
0
|
|
|
|
53,929
|
|
|
|
0
|
|
|
EQUITY
|
|
|
15,619,105
|
|
|
|
8,426,204
|
|
|
|
22,470,393
|
|
|
|
12,610,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NUMBER OF SHARES
|
|
|
1,921,928,523
|
|
|
|
468,550,049
|
|
|
|
1,921,928,523
|
|
|
|
468,550,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R$ PER SHARE *
|
|
|
8.126788
|
|
|
|
17.983572
|
|
|
|
11.691586
|
|
|
|
26.914081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXCHANGE RATIO**
|
|
|
2.212876
|
|
|
|
|
|
|
|
2.302004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Adjusted to reflect the exclusion of treasury stock
|
|
**
|
Number of BRT shares for 1 TNL share
|
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
INTRODUCTION
|
|
|
9
|
|
|
|
|
|
|
|
|
|
2.
|
|
PRINCIPLES AND QUALIFICATIONS
|
|
|
10
|
|
|
|
|
|
|
|
|
|
3.
|
|
RESPONSIBILITY LIMITS
|
|
|
11
|
|
|
|
|
|
|
|
|
|
4.
|
|
APPRAISAL METHODOLOGY
|
|
|
12
|
|
|
|
|
|
|
|
|
|
5.
|
|
GENERAL APPRAISAL CRITERIA
|
|
|
14
|
|
|
|
|
|
|
|
|
|
6.
|
|
APPRAISAL OF THE NET EQUITY AT MARKET PRICE OF BRT
|
|
|
25
|
|
|
|
|
|
|
|
|
|
7.
|
|
APPRAISAL OF THE NET EQUITY AT MARKET PRICE OF TNL
|
|
|
29
|
|
|
|
|
|
|
|
|
|
8.
|
|
CONCLUSION
|
|
|
32
|
|
|
|
|
|
|
|
|
|
9.
|
|
ATTACHMENTS
|
|
|
33
|
|
1. INTRODUCTION
APSIS CONSULTORIA EMPRESARIAL Ltda. (APSIS) was appointed by BRT and TNL to calculate the Net Equity of each of BRT and TNL, following the appraisal of the equity of both companies pursuant to the same
criteria and as of the same date, at market prices, for the purpose of article 264 of Law No. 6,404 of 12/15/1976 (Corporate Law).
In
preparing this report, data and information supplied by third parties were used, in the form of documents and verbal interviews with the clients. The estimates used in this process are based on documents and information which include, among others,
the following:
|
•
|
|
Bylaws or Articles of Incorporation of the companies;
|
|
•
|
|
Financial statements of the group’s companies;
|
|
•
|
|
Organization chart and corporate holdings;
|
|
•
|
|
List of permanent assets;
|
|
•
|
|
IAN (Annual Reports) and ITR (Quarterly Reports) of the companies;
|
|
•
|
|
Set of architectural plans;
|
|
•
|
|
Documents with technical specifications of the equipment appraised.
|
Inspections of the operational sites were conducted in March and April 2009.
The APSIS team responsible for the coordination and performance of this report consists of the following
professionals:
|
|
|
• AMILCAR DE CASTRO
sales director
• ANA CRISTINA FRANÇA DE SOUZA
civil engineer
post-graduated in Accouting Sciences (CREA/RJ 91.1.03043-4)
• BETINA DENGLER
project manager
• CESAR DE FREITAS SILVESTRE
accountant (CRC/RJ 44779/O-3)
• CLAUDIO MARÇAL DE FREITAS
accountant (CRC/RJ 55029/O-1)
• FLAVIO LUIZ PEREIRA
accountant (CRC/RJ 022016-O-9)
• LUIZ PAULO CESAR SILVEIRA
mechanical engineer
máster of business management (CREA/RJ 89.1.00165-1)
• MARGARETH GUIZAN DA SILVA OLIVEIRA
civil engineer (CREA/RJ 91.1.03035-3)
• RICARDO DUARTE CARNEIRO MONTEIRO
civil engineer
post-graduated in economic engineering (CREA/RJ 30137-D)
• SÉRGIO FREITAS DE SOUZA
economist (CORECON/RJ 23521-0)
|
2. PRINCIPLES AND QUALIFICATIONS
This report strictly complies with the fundamental principles described below:
|
•
|
|
The professional fees of APSIS are not, in any way, subject to the conclusions of this report.
|
|
•
|
|
The report was prepared by APSIS and no one, other than the consultants themselves, prepared the analyses and respective conclusions.
|
|
•
|
|
In this report, it is assumed that the information received from third parties is correct, and the sources thereof are contained in this Report.
|
|
•
|
|
To the best knowledge and belief of the consultants, the analyses, opinions and conclusions presented in this Report are based on data, diligence,
research and surveys that are true and correct.
|
|
•
|
|
APSIS assumes full responsibility for the matter of Appraisal Engineering, including implicit appraisals, and for the exercise of its honorable duties,
primarily established in the applicable laws, codes or regulations.
|
|
•
|
|
For projection purposes, we start from the premise of the nonexistence of liens or encumbrances of any nature, whether judicial or extrajudicial,
affecting the object of the relevant work, other than those listed in this report.
|
|
•
|
|
This report meets the specifications and criteria established by the standards of the Brazilian Association of Technical Standards (ABNT), the
specifications and criteria established by USPAP (Uniform Standards of
|
|
|
|
Professional Appraisal Practice), in addition to the requirements imposed by different bodies, such as: the Treasury Department, the Central Bank of Brazil, CVM (the Brazilian Securities and
Exchange Commission), SUSEP (Private Insurance Superintendence), etc.
|
|
•
|
|
The report presents all the restrictive conditions imposed by the methodologies adopted, which affect the analyses, opinions and conclusions contained
in the same.
|
|
•
|
|
APSIS declares that neither it nor the consultants and appraisers have any direct or indirect interest in the companies contemplated in this Report, in
their respective controllers, or in the transaction to which the “Protocol and Justification” refers, there being no relevant circumstances which may characterize conflict or communion of interests, whether potential or actual, towards the
issuance of this Report.
|
|
•
|
|
In the course of our work, controllers and managers of the companies contemplated in this Report did not direct, limit, hinder or take any actions,
which have or may have compromised access, use or knowledge of information, property, documents or work methodologies relevant to the quality of our conclusions.
|
|
•
|
|
This Report was prepared in strict compliance with the postulates set forth in the Professional Code of Ethics of CONFEA - Federal Council of
Engineering, Architecture and Agronomy and of the Legal Institute of Engineering.
|
3. RESPONSIBILITY LIMITS
|
•
|
|
To prepare this report, APSIS used historic data and information, audited by third parties or unaudited, and projected unaudited data supplied in
writing or verbally by the companies’ management or obtained from the sources mentioned. Therefore, APSIS assumed as true the data and information obtained for this report and does not have any responsibility in connection with its
truthfulness.
|
|
•
|
|
The scope of this work did not include an audit of the financial statements or a revision of the work performed by the companies’ auditors.
|
|
•
|
|
Our work was developed for use by the applicant in connection with the previously described objectives. Therefore, it may be disclosed as part of the
documents related to the Corporate Restructuring, and the mention of this work in related publications is authorized. It may also be filed with the Brazilian Securities and Exchange Commission (the “CVM”) and with the U.S. Securities and
Exchange Commission (the “SEC”), as well as made available to shareholders and third parties, including through the websites of the involved companies.
|
|
•
|
|
We emphasize that understanding the conclusion of this report will require reading it and its attachments in full. Therefore, conclusions should not be
drawn from a partial reading.
|
|
•
|
|
We are not responsible for occasional losses to the applicant, its shareholders, directors, creditors or to other parties as a result of the use of
data and information supplied by the companies and contained in this Report.
|
|
•
|
|
The analyses and conclusions contained herein are based on several premises, held as of this date, of future operational projections, such as:
macroeconomic factors, values used in the market, exchange rate variations, sale prices, volumes, market share, revenues, taxes, investments, operational margins, etc. Thus, future results may differ from any forecast or estimate contained in this
Report.
|
|
•
|
|
This appraisal does not reflect events and their respective impacts, occurring after the date of issue of this Report.
|
4. APPRAISAL METHODOLOGY
ASSETS APPROACH - NET EQUITY AT MARKET PRICES
This methodology is derived from generally
accepted accounting principles (GAAP), where financial statements are prepared based on the principle of historic or acquisition cost.
Due to
this principle and to the fundamental principle of accounting, the book value of the assets of a company less the book value of its liabilities equals the book value of its net equity.
The application of this methodology contemplates, as a starting point, the book values of assets and liabilities and requires that some of these items be adjusted so as to reflect their probable
realization values. The result of the application of this method may provide an initial basis for the estimate of the company’s value, as well as a useful basis of comparison with results from other methodologies.
On the other hand, the basic principles of economics allow us to create the following appraisal technique: the value defined for assets less the value
defined for liabilities equals the value defined for a company’s net equity. From an appraisal perspective, the relevant value definitions are those appropriate to the purpose of the appraisal.
The assets approach, therefore, aims to appraise a company by adjusting the book value (net balance) to respective fair market values. The assets and
liabilities deemed relevant are appraised for their fair market value, with a comparison made between this value and its book value (net balance).
The general appraisal criteria applicable to the adjustment of assets subject to an appraisal at market
prices can be found in detail in Chapter 6 of this report.
After being duly analyzed, these adjustments are added to the book Net Equity
value, in this way determining the company’s market value through the assets approach. The company’s fair market value is the Net Equity value after giving effect to the adjustments of the assets and liabilities appraised.
It is worth noting that the identification and quantification of liabilities that were neither recorded nor
disclosed by the companies’ managements were not within the scope of our work.
The methodology and scope adopted in this assessment is
aimed at appraising the companies’ going concern values. Therefore, expenses incurred in asset realization or liability requirements, as well as related to the companies’ bankruptcy or liquidation processes, were not contemplated in the
calculations.
PRINCIPLE STEPS OF THE APPRAISAL
|
|
•
|
|
Reading and analysis of the companies’ balance sheets.
|
|
|
•
|
|
Analysis of asset and liability accounts recorded on the companies’ balance sheets, to identify accounts subject to adjustments, as well as
calculations of their probable market values.
|
|
|
•
|
|
Adjustment of the companies’ fixed assets in accordance with their respective market values on the basis of equity appraisals performed by Apsis.
|
|
|
•
|
|
Adjustment of relevant intangible operating assets in accordance with their respective market values, on the basis of premises and appraisal criteria
developed by Apsis.
|
|
|
•
|
|
Application of the equity method of accounting to the net equity at market value of subsidiary and affiliated companies for the purpose of calculating
the value of investments.
|
|
|
•
|
|
Calculation of the market value of the companies’ net equity.
|
5. GENERAL APPRAISAL CRITERIA
This report was prepared for the purpose of complying with current legislation in connection with the Corporate Restructuring, as described in the Executive Summary of this report.
EVENTS AND ADJUSTMENTS CONTEMPLATED IN THE APPRAISAL
The financial statements considered as the basis for this report were prepared by the companies, having already fully complied with Act No. 11. 638/07. The table below shows the general criteria
defined for the appraisal of each account and/or group of accounts of the companies involved in the operation.
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
General
|
|
Accounts whose value is less than R$500,000 reais were not analyzed; the book value was kept, with the exception of those that were consolidated in a specific group.
|
|
Market value identical to book value.
|
|
|
|
|
|
Available Funds
|
|
Represented by:
• Cash and Banks
• Cash Equivalents - Short-term investments, with original maturity being
ninety days or less and immediately convertible into cash;
• Financial Investments - Exclusive investment funds and private securities.
Cash equivalents and investments held by the Company and its subsidiaries are classified as held for trading and are measured at their respective fair
values.
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Accounts Receivable from Clients
|
|
Substantially represented by:
• Services for billing
• Billed services
• Sales of Goods
• Provision for doubtful accounts constituted on the basis of individual
analyses and on the analyses of groups of assets of similar risk, for which criteria for establishing the provision contemplates the ascertainment of percentiles of losses occurring in each maturity range of accounts receivable and, on the grounds
of such loss percentiles, future losses are estimated over the current balance of accounts receivable.
|
|
Market value identical to book value.
|
|
|
|
|
|
Inventories
|
|
Substantially represented by cell phones and accessories for resale, net of provision for losses or for adjustments to the forecast in which they should be realized.
|
|
Market value identical to book value.
|
|
|
|
|
|
Derivatives
(Assets and Liabilities)
|
|
Represented by:
• “Swap cross currency” contracts US$/R$:
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
|
|
• Active Position - US$ + 5,86%
• Liability Position - 100% CDI
• “Swap cross currency” contracts Iene/R$:
• Active Position - Iene + Iene Libor 6M + 1,25%
• Liability Position - 85% a 90% CDI
• “Swap cross currency” contracts Iene/US$:
• Active Position - Iene Libor 6m + 1,25%
• Liability Position - US Libor 6m + 3,59%
Hedging operations contracted with financial institutions to minimize the risks of
loans and financing contracted in foreign currency, without leverage, because of the possibility of fluctuations in exchange rates that may increase the balance of them. Portion of foreign currency debt in foreign currency 90.4% is covered by this
mode of operation and financial investments in foreign currency.
The
positive or negative effects in hedging transactions are measured at fair value using available information and appropriate valuation methodologies for each situation.
|
|
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Deferred and Recoverable Taxes
|
|
Represented by:
• Deferred Income Tax and Social Contribution - Calculated over temporary
differences, tax losses and the negative base of social contribution, and accounted for to the extent of the existence of future taxable profit at sufficient level for the total or partial use of deferred taxes.
• Tax Credits - Composed of:
• ICMS (Provisional Value Added Tax)
• IRPJ/CS (Legal Entity Income Tax/Social
Contribution)
• PIS & COFINS (Social Participation Program and
Contribution to Social Security Financing)
• Others
The ICMS recoverable originates, for the most part, from credits constituted on the acquisition of fixed assets - Complementary Law No. 102/00.
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Judicial Deposits
|
|
Represented by the balance of judicial deposits related to contingencies, which the balances are updated monetarily. The deposits are
in connection with the following contingencies:
• Labor
• Tax
• Civil
|
|
Market value identical to book value.
|
|
|
|
|
|
Assets Related to Pension Funds
|
|
Represented by:
• Contribution of the sponsor without right of redemption by the
participants who left the Plan.
• Part of the Plan’s surplus, attributed to the
sponsor.
|
|
Market value identical to book value.
|
|
|
|
|
|
Available Financial Assets for Sale
|
|
Represented by the participation of 7.2% of TMAR in Portugal Telecom’s capital resulting from the acquisition of stake by
subscribing for the purchase and sale of shares to term.
The investment
was recorded under this heading, as required by the CPC 38.
|
|
Market value identical to book value.
|
|
|
|
|
|
Others
|
|
Substantially represented by:
|
|
• Prepaid Expenses - The balance of
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
|
|
• Prepaid Expenses
• Advances to Suppliers
• Receivables
• Advances to Employees
• Fiscal Benefits
• Other Assets
|
|
the following prepaid expenses were cancelled:
• Publicity and Advertisement
• Sponsor
• Financial charges
• FOL
• Directories
• FISTEL
• Others
• Other Assets: Maintained the book value taking in to consideration that
this asset was measured at its fair value.
|
|
|
|
|
|
Participation in Subsidiary Companies
|
|
Appraised through the Equity Method of Accounting.
|
|
Balances were adjusted by the results of market value adjustments reflected in the net equities of the subsidiaries appraised.
|
|
|
|
|
|
Other Investments
|
|
Represented by other investments whose balances are stated net of provision for loss when applicable.
|
|
Market value identical to book value.
|
|
|
|
|
|
Automatic Commutation Equipment, Means of Data Communication and
|
|
Assets of utmost importance for the business. Appraised at market prices on the basis of their replacement cost through
|
|
Market value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Transmission, Termination and Infrastructure
|
|
the use of project parameters. Methodology and respective calculations can be found in detail in Attachment 2.
|
|
|
|
|
|
|
|
Land and Buildings
|
|
Appraised at market prices, with specific appraisal reports for applicable properties. A table comprising the summary of values per property can be found in Attachment
3.
|
|
Market value.
|
|
|
|
|
|
Work in Progress
|
|
Assets whose book value is close to their market value, due to their being recent acquisitions.
|
|
Market value identical to book value.
|
|
|
|
|
|
Goodwill Surplus Value
|
|
Goodwill determined in subsidiaries not valued.
|
|
Market value identical to book value.
|
|
|
|
|
|
Intangible
|
|
Represented by:
• Goodwill in subsidiaries not valued
• Data Processing System
• Formation of Intangibles
• Others
• Patents and Brands
• Regulatory Licenses
|
|
For purposes of compliance with article 264 of the Lei das S / A, the analyst chose the values of historical cost as the best reference, in order to remove the influence of the
projections of future scenarios present in the traditional methodologies of valuation at market prices of this group of assets.
|
|
|
|
|
|
Loans, Financing, Debentures, Derivative Financial Instruments and
|
|
Represented by:
• Financial Institutions:
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Intercompany Loans
|
|
• Local Currency
• Foreign Currency
• Financial and Derivative Instruments
• Public Debentures
|
|
|
|
|
|
|
|
Suppliers
|
|
Substantially represented by:
• Network Infrastructure Material
• Transfers
• Commissions on sales
• Diverse Suppliers
The payments end in the short-term for all obligations.
|
|
Market value identical to book value.
|
|
|
|
|
|
Taxes, Fees and Contributions
|
|
Represented by:
• ICMS (1) (Provisional Value Added Tax)
• PIS and COFINS (Social Participation Program and
Contribution)
• IRPJ (Legal Entity Income Tax) payable
• Social Contribution payable
• Others
|
|
Maintained the book value, because it did not show signs of relevant market adjustments, except for the IR / CS, for which the balance was adjusted for the effects of income tax and
social contribution levied on adjustments to the market subject to such taxation.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Staff, Social Charges and Benefits
|
|
Substantially represented by:
• Social Charges and Benefits
• Share Option Plan
• Others
|
|
Market value identical to book value.
|
|
|
|
|
|
Authorization for Exploration of Services
|
|
Substantially represented by payable values to ANATEL for grants of radiofrequency and authorization of services from SMP and concession of STFC, obtained through
auctions.
|
|
Market value identical to book value.
|
|
|
|
|
|
Dividends, On Shareholders Equity Interest and Share of Net Income
|
|
Represented by dividends and interest on shareholders’ equity net of withholding Income tax when applicable, payable to controlling and non-controlling
shareholders.
|
|
Market value identical to book value.
|
|
|
|
|
|
Refinancing Tax Program
|
|
• Referred to the values of the installments (REFIS 4)
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Provision for Contingencies
|
|
Represented by the balance of provisions for Labor, Tax and Civil contingencies whose risks are classified as PROBABLE, net of judicial
deposits and made on the grounds of legal requirements or caution.
In the
appraisal of the company and its subsidiaries, contingencies classified pursuant to their chances of being incurred at a POSSIBLE or REMOTE risk level, are not provisioned, albeit, in some cases, similar matters may be framed in different risk-level
classifications, a fact which has been justified by the peculiar factual and procedural status of each process. However, in some situations, judicial deposits are made on the grounds of legal requirements or caution.
|
|
Market value identical to book value.
|
|
|
|
|
|
Provision for Pension Funds and Other Benefits
|
|
Substantially represented by the company’s and its subsidiaries’ sponsoring of complementary social security benefit plans,
relative to retirement benefits for assisted employees and participants.
For defined benefit plans, the Company and its subsidiaries have the immediate recognition of actuarial gains and losses, being made the full liabilities
for plans showing deficits.
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Other Accounts Payable
|
|
Substantially represented by :
• Tax Credit Acquisition Obligations
• Self-financing Resources
• Other accounts payable
|
|
Market value identical to book value.
|
|
|
|
|
|
Net Equity
|
|
•
Adjustments at Market Value
- Resulting from the appraisal of Assets, Rights
and Obligations, appraised at market value, net of tax effects.
|
|
Adjusted by the premium paid for the valued assets net of taxes.
|
6. APPRAISAL OF THE NET EQUITY AT MARKET PRICE OF BRT
This report uses the assets approach for the appraisal of the Net Equity at market price of BRT. In this approach, relevant assets and liabilities were
appraised so as to reflect their fair market value, according to the criteria detailed in Chapter 5.
RELEVANT ASSETS
As part of the Corporate Restructuring, TMAR will become a wholly-owned subsidiary of BRT immediately after the merger of COARI into BRT, and before the
merger of TNL into BRT, as shown in the chart below:
Therefore, to arrive at the value of the Consolidated Net Equity at market prices of BRT, it was necessary
to appraise BRT’s relevant operating assets as they would exist following the merger of COARI into BRT.
FIXED ASSETS
Property that integrates the fixed assets relating to equipment accounts are of the utmost relevance among the set of BRT’s assets. Land and
buildings are assets of secondary importance within the telephony segment. Appraisal of these assets can be found in Attachment 2 hereof and in specific reports for the main real estate, and is summarized on the following table:
FIXED TELEPHONY’S FIXED ASSETS - REGION I
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
1,511,906,627.38
|
|
|
Transmission equipments
|
|
|
4,464,811,214.12
|
|
|
Work in progress
|
|
|
1,512,792,427.58
|
|
|
Infrastructure
|
|
|
4,483,295,564.03
|
|
|
Buildings
|
|
|
973,880,035.98
|
|
|
Other assets
|
|
|
347,771,009.25
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
13,294,456,878.34
|
|
|
|
|
|
|
|
FIXED TELEPHONY’S FIXED ASSETS - REGION II
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
705,666,601.08
|
|
|
Transmission equipments
|
|
|
3,787,824,100.80
|
|
|
Work in progress
|
|
|
398,512,264.36
|
|
|
Infrastructure
|
|
|
2,622,685,901.28
|
|
|
Buildings
|
|
|
924,269,552.40
|
|
|
Other assets
|
|
|
286,792,110.19
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
8,725,750,530.11
|
|
|
|
|
|
|
|
MOBILE’S FIXED ASSETS - REGION I and III
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
1,007,002,880.05
|
|
|
Transmission equipments
|
|
|
2,911,725,900.48
|
|
|
Work in progress
|
|
|
464,795,248.99
|
|
|
Infrastructure
|
|
|
1,044,996,518.31
|
|
|
Buildings
|
|
|
136,214,216.09
|
|
|
Other assets
|
|
|
271,628,254.91
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
5,836,363,018.82
|
|
|
|
|
|
|
|
MOBILE’S FIXED ASSETS - REGION II
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
259,300,159.23
|
|
|
Transmission equipments
|
|
|
1,028,946,323.56
|
|
|
Work in progress
|
|
|
150,088,047.46
|
|
|
Infrastructure
|
|
|
140,755,529.12
|
|
|
Buildings
|
|
|
425,402,887.50
|
|
|
Other assets
|
|
|
124,030,264.31
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
2,128,523,211.19
|
|
|
|
|
|
|
|
APPRAISAL OF OTHER ASSETS AND LIABILITIES
For other assets and liabilities of BRT, we used the criteria specified in Chapter 5, as shown on the calculation spreadsheets of Attachment 1.
VALUE OF THE NET EQUITY AT MARKET PRICE OF BRT
The table below shows the value of the Net Equity at Market Price of BRT as of the base date, with respective adjustments made in the main accounts,
considering the subsequent events this report:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASIL TELECOM S.A. (BRT)
|
|
FINANCIAL STATEMENTS
|
|
|
CONSOLIDATED BALANCE SHEETS (THOUSANDS REAIS)
|
|
BALANCE
AS
OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
20,127,453
|
|
|
|
-1,501,984
|
|
|
|
18,625,469
|
|
|
|
-627,662
|
|
|
|
17,997,807
|
|
|
LONG TERM ASSETS
|
|
|
17,099,149
|
|
|
|
0
|
|
|
|
17,099,149
|
|
|
|
0
|
|
|
|
17,099,149
|
|
|
INVESTMENTS
|
|
|
57,377
|
|
|
|
0
|
|
|
|
57,377
|
|
|
|
0
|
|
|
|
57,377
|
|
|
- Other Investments
|
|
|
57,377
|
|
|
|
0
|
|
|
|
57,377
|
|
|
|
0
|
|
|
|
57,377
|
|
|
FIXED ASSETS
|
|
|
19,740,948
|
|
|
|
0
|
|
|
|
19,740,948
|
|
|
|
11,033,315
|
|
|
|
30,774,263
|
|
|
INTANGIBLE ASSETS
|
|
|
3,467,445
|
|
|
|
0
|
|
|
|
3,467,445
|
|
|
|
0
|
|
|
|
3,467,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
60,492,372
|
|
|
|
-1,501,984
|
|
|
|
58,990,388
|
|
|
|
10,405,653
|
|
|
|
69,396,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
14,685,222
|
|
|
|
-1,501,984
|
|
|
|
13,183,238
|
|
|
|
0
|
|
|
|
13,183,238
|
|
|
NON-CURRENT LIABILITIES
|
|
|
30,150,559
|
|
|
|
0
|
|
|
|
30,150,559
|
|
|
|
3,537,922
|
|
|
|
33,688,481
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
37,486
|
|
|
|
0
|
|
|
|
37,486
|
|
|
|
16,443
|
|
|
|
53,929
|
|
|
EQUITY
|
|
|
15,619,105
|
|
|
|
0
|
|
|
|
15,619,105
|
|
|
|
6,851,288
|
|
|
|
22,470,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
60,492,372
|
|
|
|
-1,501,984
|
|
|
|
58,990,388
|
|
|
|
10,405,653
|
|
|
|
69,396,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued in the Corporate Restructuring.
|
VALUE OF BRT SHARES, AS OF THE BASE DATE, AFTER GIVING EFFECT TO THE PREVIOUS STEPS OF THE CORPORATE
RESTRUCTURING
|
|
|
|
|
|
|
1,921,928,525 shares
|
|
|
VALUE PER SHARE
|
|
|
Book equity value *
|
|
R$
|
8.126788
|
|
|
Adjustment per share
|
|
R$
|
3.564798
|
|
|
Equity value adjusted at market price (1)
|
|
R$
|
11.691586
|
|
|
(1)
|
Adjusted to reflect the exclusion of treasury stock
|
7. APPRAISAL OF THE NET EQUITY AT MARKET PRICE OF TNL
TNL, BRT’s parent company following the merger of COARI into BRT, performs simple holding company functions. It was adopted in this report the asset
approach to value the net equity at market value of TNL. In this approach, we valued the relevant assets and liabilities to reflect their fair market value, according to the criteria detailed in Chapter 5.
RELEVANT ASSETS
The relevant assets of TNL are its investments in BRT, the relevant assets and respective adjustments of which were already shown in the previous chapter.
APPRAISAL OF OTHER ASSETS AND LIABILITIES
For other assets and liabilities of TNL, we adopted the criteria specified in Chapter 5, as shown on the calculation spreadsheets of Attachment 1.
VALUE OF THE NET EQUITY AT MARKET PRICE OF TNL
The table below shows the value of the Net Equity at Market Price of TNL, as of the base date, with respective adjustments previously described:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TELE NORTE LESTE PARTICIPAÇÕES S.A.
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE AS
OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
548,642
|
|
|
|
0
|
|
|
|
548,642
|
|
|
|
0
|
|
|
|
548,642
|
|
|
LONG TERM ASSETS
|
|
|
435,171
|
|
|
|
0
|
|
|
|
435,171
|
|
|
|
-2,947
|
|
|
|
432,224
|
|
|
INVESTMENTS
|
|
|
18,332,655
|
|
|
|
-8,774,178
|
|
|
|
9,558,477
|
|
|
|
4,186,335
|
|
|
|
13,744,812
|
|
|
- Investments in subsidiaries:
|
|
|
18,325,023
|
|
|
|
-8,774,178
|
|
|
|
9,550,845
|
|
|
|
4,186,335
|
|
|
|
13,737,180
|
|
|
- Other Investments
|
|
|
7,632
|
|
|
|
0
|
|
|
|
7,632
|
|
|
|
0
|
|
|
|
7,632
|
|
|
FIXED ASSETS
|
|
|
8,021
|
|
|
|
0
|
|
|
|
8,021
|
|
|
|
0
|
|
|
|
8,021
|
|
|
INTANGIBLE ASSETS
|
|
|
1,073
|
|
|
|
0
|
|
|
|
1,073
|
|
|
|
0
|
|
|
|
1,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
19,325,562
|
|
|
|
-8,774,178
|
|
|
|
10,551,384
|
|
|
|
4,183,388
|
|
|
|
14,734,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
1,710,173
|
|
|
|
0
|
|
|
|
1,710,173
|
|
|
|
0
|
|
|
|
1,710,173
|
|
|
NON-CURRENT LIABILITIES
|
|
|
415,007
|
|
|
|
0
|
|
|
|
415,007
|
|
|
|
-1,002
|
|
|
|
414,005
|
|
|
EQUITY
|
|
|
17,200,382
|
|
|
|
-8,774,178
|
|
|
|
8,426,204
|
|
|
|
4,184,390
|
|
|
|
12,610,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
19,325,562
|
|
|
|
-8,774,178
|
|
|
|
10,551,384
|
|
|
|
4,183,388
|
|
|
|
14,734,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents reversal of negative goodwill recorded as a result of the acquisition of Brasil Telecom in January 2009 for a purchase price which was less than the
book value of its assets.
|
VALUE OF TNL SHARES, AS OF THE BASE DATE, AFTER GIVING EFFECT TO THE PREVIOUS STEPS OF THE CORPORATE
RESTRUCTURING
|
|
|
|
|
|
|
468,550,049 shares
|
|
|
VALUE PER SHARE
|
|
|
Book equity value *
|
|
R$
|
17.983572
|
|
|
Adjustment per share
|
|
R$
|
8.930509
|
|
|
Equity value adjusted at market price (1)
|
|
R$
|
26.914081
|
|
|
(1)
|
Adjusted to reflect the exclusion of treasury stock
|
8. CONCLUSION
In the light of the analyses made of the previously mentioned documents, and on the basis of studies conducted by APSIS, the experts concluded that the rate of exchange of TNL shares for BRT shares,
appraised for the values of their Net Equity at Market Prices, appraised, in turn, through the assets approach, as of June 30, 2011, are:
2.302004
shares of BRT for 1 share of TNL
Having concluded Report RJ-0375/11-07, which consists of 33 (thirty three) pages typed on one side and 4 (four) attachments and reproduced in 3 (three) original counterparts, APSIS Consultoria Empresarial
Ltda., CREA/RJ 82.2.00620-1 and CORECON/RJ RF/2.052-4, a company specializing in the appraisal of assets, legally represented by the signatories below, makes itself available for any clarifications which may be necessary.
Rio de Janeiro, August 12, 2011.
|
|
|
|
|
Diretor
|
|
Gerente de Projetos
|
9. ATTACHMENTS
|
|
1.
|
VALUATION CALCULATIONS
|
|
|
2.
|
MACHINERY AND EQUIPMENT VALUATION
|
|
|
4.
|
APSIS GLOSSARY AND PROFILES
|
|
|
|
|
|
|
|
|
|
SÃO PAULO - SP
Av. Angélica, nº 2.503, Conj. 42
Consolação, CEP: 01227-200
Tel.: +
55 11 3666.8448 Fax: + 55 11 3662-5722
|
|
RIO DE JANEIRO - RJ
Rua da Assembleia, nº. 35, 12º andar
Centro, CEP: 20011-001
Tel.: + 55 21 2212.6850
Fax: + 55 21 2212.6851
|
ATTACHMENT 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TELE NORTE LESTE PARTICIPAÇÕES S.A.
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
|
|
|
BALANCE AS OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
548,642
|
|
|
|
0
|
|
|
|
548,642
|
|
|
|
0
|
|
|
|
548,642
|
|
|
Cash and Cash Equivalents
|
|
|
|
|
|
|
298,623
|
|
|
|
0
|
|
|
|
298,623
|
|
|
|
0
|
|
|
|
298,623
|
|
|
Financial Applications
|
|
|
|
|
|
|
111,448
|
|
|
|
0
|
|
|
|
111,448
|
|
|
|
0
|
|
|
|
111,448
|
|
|
Deferred Taxes and Taxes Recoverable
|
|
|
|
|
|
|
15,336
|
|
|
|
0
|
|
|
|
15,336
|
|
|
|
0
|
|
|
|
15,336
|
|
|
Other Assets
|
|
|
|
|
|
|
123,235
|
|
|
|
0
|
|
|
|
123,235
|
|
|
|
0
|
|
|
|
123,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
18,776,920
|
|
|
|
-8,774,178
|
|
|
|
10,002,742
|
|
|
|
4,183,388
|
|
|
|
14,186,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM ASSETS
|
|
|
|
|
|
|
435,171
|
|
|
|
0
|
|
|
|
435,171
|
|
|
|
-2,947
|
|
|
|
432,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Taxes
|
|
|
|
|
|
|
267,719
|
|
|
|
0
|
|
|
|
267,719
|
|
|
|
0
|
|
|
|
267,719
|
|
|
Credits with Related Parties
|
|
|
|
|
|
|
120,644
|
|
|
|
0
|
|
|
|
120,644
|
|
|
|
0
|
|
|
|
120,644
|
|
|
Other Taxes
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Related Assets to Pension Funds
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Assets
|
|
|
|
|
|
|
46,808
|
|
|
|
0
|
|
|
|
46,808
|
|
|
|
-2,947
|
|
|
|
43,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERMANENT
|
|
|
|
|
|
|
18,341,749
|
|
|
|
-8,774,178
|
|
|
|
9,567,571
|
|
|
|
4,186,335
|
|
|
|
13,753,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
18,332,655
|
|
|
|
-8,774,178
|
|
|
|
9,558,477
|
|
|
|
4,186,335
|
|
|
|
13,744,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Investments in subsidiaries:
|
|
|
|
|
|
|
18,325,023
|
|
|
|
-8,774,178
|
|
|
|
9,550,845
|
|
|
|
4,186,335
|
|
|
|
13,737,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Brasil Telecom S.A.
|
|
|
61.10
|
%
|
|
|
18,318,185
|
|
|
|
-8,774,178
|
|
|
|
9,544,007
|
|
|
|
4,186,335
|
|
|
|
13,730,342
|
|
|
- Other Subsidiaries not accounted for:
|
|
|
|
|
|
|
6,838
|
|
|
|
0
|
|
|
|
6,838
|
|
|
|
0
|
|
|
|
6,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Other Investments
|
|
|
|
|
|
|
7,632
|
|
|
|
0
|
|
|
|
7,632
|
|
|
|
0
|
|
|
|
7,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
|
|
|
|
8,021
|
|
|
|
0
|
|
|
|
8,021
|
|
|
|
0
|
|
|
|
8,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Work in Progress
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Automatic Switching Equipment
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Transmission and Other Equipment
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Infrastructure
|
|
|
|
|
|
|
125
|
|
|
|
0
|
|
|
|
125
|
|
|
|
0
|
|
|
|
125
|
|
|
- Buildings
|
|
|
|
|
|
|
6,986
|
|
|
|
0
|
|
|
|
6,986
|
|
|
|
0
|
|
|
|
6,986
|
|
|
- Other Assets
|
|
|
|
|
|
|
910
|
|
|
|
0
|
|
|
|
910
|
|
|
|
0
|
|
|
|
910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets
|
|
|
|
|
|
|
1,073
|
|
|
|
0
|
|
|
|
1,073
|
|
|
|
0
|
|
|
|
1,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Goodwill
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Data Processing System
|
|
|
|
|
|
|
888
|
|
|
|
0
|
|
|
|
888
|
|
|
|
0
|
|
|
|
888
|
|
|
- Brands and Patents
|
|
|
|
|
|
|
185
|
|
|
|
0
|
|
|
|
185
|
|
|
|
0
|
|
|
|
185
|
|
|
- Regulatory Licenses
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Intangible Assets in Formation
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Other Intangible Assets
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
19,325,562
|
|
|
|
-8,774,178
|
|
|
|
10,551,384
|
|
|
|
4,183,388
|
|
|
|
14,734,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TELE NORTE LESTE PARTICIPAÇÕES S.A.
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE AS OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT LIABILITIES
|
|
|
1,710,173
|
|
|
|
0
|
|
|
|
1,710,173
|
|
|
|
0
|
|
|
|
1,710,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social and Worker Obligations
|
|
|
483
|
|
|
|
0
|
|
|
|
483
|
|
|
|
0
|
|
|
|
483
|
|
|
Suppliers
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Fiscal Obligations
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Loans and Financing
|
|
|
1,508,204
|
|
|
|
0
|
|
|
|
1,508,204
|
|
|
|
0
|
|
|
|
1,508,204
|
|
|
Dividends and Interest Payable on Capital
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Financial Instruments and Derivatives
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Taxes
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Refinancing Fiscal Program
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Permits and Leasing Payable
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Obligations
|
|
|
201,486
|
|
|
|
0
|
|
|
|
201,486
|
|
|
|
0
|
|
|
|
201,486
|
|
|
Provisions
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
415,007
|
|
|
|
0
|
|
|
|
415,007
|
|
|
|
-1,002
|
|
|
|
414,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
415,007
|
|
|
|
0
|
|
|
|
415,007
|
|
|
|
-1,002
|
|
|
|
414,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and Financing
|
|
|
219,840
|
|
|
|
0
|
|
|
|
219,840
|
|
|
|
0
|
|
|
|
219,840
|
|
|
Related Party Liabilities
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Financial Instruments and Derivatives
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Permits and Leasing Payable
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Refinancing Fiscal Program
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Taxes
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
-1,002
|
|
|
|
-1,002
|
|
|
Other Obligations
|
|
|
194,422
|
|
|
|
0
|
|
|
|
194,422
|
|
|
|
0
|
|
|
|
194,422
|
|
|
Provisions
|
|
|
745
|
|
|
|
0
|
|
|
|
745
|
|
|
|
0
|
|
|
|
745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
17,200,382
|
|
|
|
-8,774,178
|
|
|
|
8,426,204
|
|
|
|
4,184,390
|
|
|
|
12,610,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
7,254,682
|
|
|
|
0
|
|
|
|
7,254,682
|
|
|
|
0
|
|
|
|
7,254,682
|
|
|
Capital Reserves
|
|
|
1,319,113
|
|
|
|
0
|
|
|
|
1,319,113
|
|
|
|
0
|
|
|
|
1,319,113
|
|
|
Profit Reserves
|
|
|
6,457,431
|
|
|
|
0
|
|
|
|
6,457,431
|
|
|
|
0
|
|
|
|
6,457,431
|
|
|
Accumulated Profit or Loss
|
|
|
21,876
|
|
|
|
0
|
|
|
|
21,876
|
|
|
|
0
|
|
|
|
21,876
|
|
|
Equity Valuation Adjustments
|
|
|
2,147,280
|
|
|
|
-8,774,178
|
|
|
|
-6,626,898
|
|
|
|
0
|
|
|
|
-6,626,898
|
|
|
Market Adjustments
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,184,390
|
|
|
|
4,184,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
19,325,562
|
|
|
|
-8,774,178
|
|
|
|
10,551,384
|
|
|
|
4,183,388
|
|
|
|
14,734,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents reversal of negative goodwill recorded as a result of the acquisition of Brasil telecom in January 2009 for a purchase price which was less than the
book value of its assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASIL TELECOM S.A. (BRT)
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
CONSOLIDATED BALANCE SHEETS
(THOUSANDS REAIS)
|
|
|
|
|
BALANCE AS
OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
20,127,453
|
|
|
|
-1,501,984
|
|
|
|
18,625,469
|
|
|
|
-627,662
|
|
|
|
17,997,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
|
|
|
|
|
7,564,352
|
|
|
|
-1,501,984
|
|
|
|
6,062,368
|
|
|
|
0
|
|
|
|
6,062,368
|
|
|
Financial Applications
|
|
|
|
|
|
|
1,466,630
|
|
|
|
0
|
|
|
|
1,466,630
|
|
|
|
0
|
|
|
|
1,466,630
|
|
|
Receivable Accounts
|
|
|
|
|
|
|
5,852,795
|
|
|
|
0
|
|
|
|
5,852,795
|
|
|
|
0
|
|
|
|
5,852,795
|
|
|
Inventories
|
|
|
|
|
|
|
159,402
|
|
|
|
0
|
|
|
|
159,402
|
|
|
|
0
|
|
|
|
159,402
|
|
|
Deferred Taxes and Taxes Recoverable
|
|
|
|
|
|
|
538,736
|
|
|
|
0
|
|
|
|
538,736
|
|
|
|
0
|
|
|
|
538,736
|
|
|
Financial Instruments and Derivatives
|
|
|
|
|
|
|
55,862
|
|
|
|
0
|
|
|
|
55,862
|
|
|
|
0
|
|
|
|
55,862
|
|
|
Judicial and Blocked Deposits
|
|
|
|
|
|
|
1,909,311
|
|
|
|
0
|
|
|
|
1,909,311
|
|
|
|
0
|
|
|
|
1,909,311
|
|
|
Other Taxes
|
|
|
|
|
|
|
1,370,293
|
|
|
|
0
|
|
|
|
1,370,293
|
|
|
|
0
|
|
|
|
1,370,293
|
|
|
Other Assets
|
|
|
|
|
|
|
1,210,072
|
|
|
|
0
|
|
|
|
1,210,072
|
|
|
|
-627,662
|
|
|
|
582,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
40,364,919
|
|
|
|
0
|
|
|
|
40,364,919
|
|
|
|
11,033,315
|
|
|
|
51,398,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM ASSETS
|
|
|
|
|
|
|
17,099,149
|
|
|
|
0
|
|
|
|
17,099,149
|
|
|
|
0
|
|
|
|
17,099,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Applications Measured at Fair Value
|
|
|
|
|
|
|
65,997
|
|
|
|
0
|
|
|
|
65,997
|
|
|
|
0
|
|
|
|
65,997
|
|
|
Deferred Taxes
|
|
|
|
|
|
|
7,961,412
|
|
|
|
0
|
|
|
|
7,961,412
|
|
|
|
0
|
|
|
|
7,961,412
|
|
|
Financial Instruments and Derivatives
|
|
|
|
|
|
|
29,251
|
|
|
|
0
|
|
|
|
29,251
|
|
|
|
0
|
|
|
|
29,251
|
|
|
Judicial and Blocked Deposits
|
|
|
|
|
|
|
7,114,057
|
|
|
|
0
|
|
|
|
7,114,057
|
|
|
|
0
|
|
|
|
7,114,057
|
|
|
Other Taxes
|
|
|
|
|
|
|
500,055
|
|
|
|
0
|
|
|
|
500,055
|
|
|
|
0
|
|
|
|
500,055
|
|
|
Related Assets to Pension Funds
|
|
|
|
|
|
|
98,786
|
|
|
|
0
|
|
|
|
98,786
|
|
|
|
0
|
|
|
|
98,786
|
|
|
Financial Assets Available for Sale
|
|
|
|
|
|
|
1,024,649
|
|
|
|
0
|
|
|
|
1,024,649
|
|
|
|
0
|
|
|
|
1,024,649
|
|
|
Other Assets
|
|
|
|
|
|
|
304,942
|
|
|
|
0
|
|
|
|
304,942
|
|
|
|
0
|
|
|
|
304,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERMANENT
|
|
|
|
|
|
|
23,265,770
|
|
|
|
0
|
|
|
|
23,265,770
|
|
|
|
11,033,315
|
|
|
|
34,299,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
57,377
|
|
|
|
0
|
|
|
|
57,377
|
|
|
|
0
|
|
|
|
57,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Investments in subsidiaries:
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
0.0000
|
%
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Other Investments
|
|
|
|
|
|
|
57,377
|
|
|
|
0
|
|
|
|
57,377
|
|
|
|
0
|
|
|
|
57,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
|
|
|
|
19,740,948
|
|
|
|
0
|
|
|
|
19,740,948
|
|
|
|
11,033,315
|
|
|
|
30,774,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Work in Progress
|
|
|
|
|
|
|
2,731,511
|
|
|
|
0
|
|
|
|
2,731,511
|
|
|
|
0
|
|
|
|
2,731,511
|
|
|
- Automatic Switching Equipment
|
|
|
|
|
|
|
1,813,677
|
|
|
|
0
|
|
|
|
1,813,677
|
|
|
|
1,570,468
|
|
|
|
3,384,145
|
|
|
- Transmission and Other Equipment
|
|
|
|
|
|
|
7,997,980
|
|
|
|
0
|
|
|
|
7,997,980
|
|
|
|
3,814,099
|
|
|
|
11,812,079
|
|
|
- Infrastructure
|
|
|
|
|
|
|
5,144,873
|
|
|
|
0
|
|
|
|
5,144,873
|
|
|
|
3,212,046
|
|
|
|
8,356,919
|
|
|
- Buildings
|
|
|
|
|
|
|
1,290,437
|
|
|
|
0
|
|
|
|
1,290,437
|
|
|
|
2,093,187
|
|
|
|
3,383,624
|
|
|
- Other Assets
|
|
|
|
|
|
|
762,470
|
|
|
|
0
|
|
|
|
762,470
|
|
|
|
343,514
|
|
|
|
1,105,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets
|
|
|
|
|
|
|
3,467,445
|
|
|
|
0
|
|
|
|
3,467,445
|
|
|
|
0
|
|
|
|
3,467,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Goodwill
|
|
|
|
|
|
|
154,395
|
|
|
|
0
|
|
|
|
154,395
|
|
|
|
0
|
|
|
|
154,395
|
|
|
- Data Processing System
|
|
|
|
|
|
|
1,004,770
|
|
|
|
0
|
|
|
|
1,004,770
|
|
|
|
0
|
|
|
|
1,004,770
|
|
|
- Brands and Patents
|
|
|
|
|
|
|
1,070
|
|
|
|
0
|
|
|
|
1,070
|
|
|
|
0
|
|
|
|
1,070
|
|
|
- Regulatory Licenses
|
|
|
|
|
|
|
2,129,260
|
|
|
|
0
|
|
|
|
2,129,260
|
|
|
|
0
|
|
|
|
2,129,260
|
|
|
- Intangible Assets in Formation
|
|
|
|
|
|
|
146,705
|
|
|
|
0
|
|
|
|
146,705
|
|
|
|
0
|
|
|
|
146,705
|
|
|
- Other Intangible Assets
|
|
|
|
|
|
|
31,245
|
|
|
|
0
|
|
|
|
31,245
|
|
|
|
0
|
|
|
|
31,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
60,492,372
|
|
|
|
-1,501,984
|
|
|
|
58,990,388
|
|
|
|
10,405,653
|
|
|
|
69,396,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASIL TELECOM S.A. (BRT)
|
|
FINANCIAL STATEMENTS
|
|
|
CONSOLIDATED BALANCE SHEETS (THOUSANDS REAIS)
|
|
BALANCE
AS
OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT LIABILITIES
|
|
|
14,685,222
|
|
|
|
-1,501,984
|
|
|
|
13,183,238
|
|
|
|
0
|
|
|
|
13,183,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social and Worker Obligations
|
|
|
349,207
|
|
|
|
0
|
|
|
|
349,207
|
|
|
|
0
|
|
|
|
349,207
|
|
|
Suppliers
|
|
|
3,610,645
|
|
|
|
0
|
|
|
|
3,610,645
|
|
|
|
0
|
|
|
|
3,610,645
|
|
|
Fiscal Obligations
|
|
|
338,594
|
|
|
|
0
|
|
|
|
338,594
|
|
|
|
0
|
|
|
|
338,594
|
|
|
Loans and Financing
|
|
|
2,889,108
|
|
|
|
0
|
|
|
|
2,889,108
|
|
|
|
0
|
|
|
|
2,889,108
|
|
|
Dividends and Interest Payable on Capital
|
|
|
162,303
|
|
|
|
0
|
|
|
|
162,303
|
|
|
|
0
|
|
|
|
162,303
|
|
|
Financial Instruments and Derivatives
|
|
|
736,707
|
|
|
|
0
|
|
|
|
736,707
|
|
|
|
0
|
|
|
|
736,707
|
|
|
Other Taxes
|
|
|
1,809,638
|
|
|
|
0
|
|
|
|
1,809,638
|
|
|
|
0
|
|
|
|
1,809,638
|
|
|
Refinancing Fiscal Program
|
|
|
84,431
|
|
|
|
0
|
|
|
|
84,431
|
|
|
|
0
|
|
|
|
84,431
|
|
|
Permits and Leasing Payable
|
|
|
389,879
|
|
|
|
0
|
|
|
|
389,879
|
|
|
|
0
|
|
|
|
389,879
|
|
|
Other Obligations
|
|
|
2,520,444
|
|
|
|
-1,501,984
|
|
|
|
1,018,460
|
|
|
|
0
|
|
|
|
1,018,460
|
|
|
Provisions
|
|
|
1,794,266
|
|
|
|
0
|
|
|
|
1,794,266
|
|
|
|
0
|
|
|
|
1,794,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
30,150,559
|
|
|
|
0
|
|
|
|
30,150,559
|
|
|
|
3,537,922
|
|
|
|
33,688,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
30,150,559
|
|
|
|
0
|
|
|
|
30,150,559
|
|
|
|
3,537,922
|
|
|
|
33,688,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and Financing
|
|
|
19,445,062
|
|
|
|
0
|
|
|
|
19,445,062
|
|
|
|
0
|
|
|
|
19,445,062
|
|
|
Financial Instruments and Derivatives
|
|
|
385,764
|
|
|
|
0
|
|
|
|
385,764
|
|
|
|
0
|
|
|
|
385,764
|
|
|
Permits and Leasing Payable
|
|
|
1,376,437
|
|
|
|
0
|
|
|
|
1,376,437
|
|
|
|
0
|
|
|
|
1,376,437
|
|
|
Refinancing Fiscal Program
|
|
|
979,196
|
|
|
|
0
|
|
|
|
979,196
|
|
|
|
0
|
|
|
|
979,196
|
|
|
Other Taxes
|
|
|
1,554,518
|
|
|
|
0
|
|
|
|
1,554,518
|
|
|
|
3,537,922
|
|
|
|
5,092,440
|
|
|
Other Obligations
|
|
|
664,456
|
|
|
|
0
|
|
|
|
664,456
|
|
|
|
0
|
|
|
|
664,456
|
|
|
Provisions
|
|
|
5,745,126
|
|
|
|
0
|
|
|
|
5,745,126
|
|
|
|
0
|
|
|
|
5,745,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
37,486
|
|
|
|
0
|
|
|
|
37,486
|
|
|
|
16,443
|
|
|
|
53,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
15,619,105
|
|
|
|
0
|
|
|
|
15,619,105
|
|
|
|
6,851,288
|
|
|
|
22,470,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
7,934,271
|
|
|
|
0
|
|
|
|
7,934,271
|
|
|
|
0
|
|
|
|
7,934,271
|
|
|
Capital Reserves
|
|
|
5,332,256
|
|
|
|
0
|
|
|
|
5,332,256
|
|
|
|
0
|
|
|
|
5,332,256
|
|
|
Profit Reserves
|
|
|
1,885,511
|
|
|
|
0
|
|
|
|
1,885,511
|
|
|
|
0
|
|
|
|
1,885,511
|
|
|
Accumulated Profit or Loss
|
|
|
467,067
|
|
|
|
0
|
|
|
|
467,067
|
|
|
|
0
|
|
|
|
467,067
|
|
|
Equity Valuation Adjustments
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Market Adjustments
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
6,851,288
|
|
|
|
6,851,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
60,492,372
|
|
|
|
-1,501,984
|
|
|
|
58,990,388
|
|
|
|
10,405,653
|
|
|
|
69,396,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued in the Corporate Restructuring.
|
ATTACHMENT 2
MACHINERY AND EQUIPMENT VALUATION
The technical procedures used in this Report are in
accordance with the criteria set forth by Appraisal Standards NBR 14653-1:2001 and NBR 14653-2:2004 of ABNT – Brazilian Association of Technical Standards, and appraisal calculations for assessing values were devised on the basis of the direct
market data comparative method and the replacement cost method.
Based on prior experiences, APSIS developed a method for assessing values
based on comparative elements drawn out of appraised operational systems.
Below find the references used towards the performance of our work
and the criteria used for the main items of the appraisal:
REFERENCES
|
a)
|
Equity Control of fixed assets, supplied by BrT to all the group’s companies;
|
|
b)
|
Quotations for the relevant equipment in each functional class;
|
|
c)
|
Analysis of BrT’s new operational projects for the purpose of harmonizing concepts and premises (APSIS Engineering and BrT Engineering);
|
|
d)
|
Data supplied by managers of several central offices during technical visitations, and;
|
|
e)
|
Appraisal of specific features of each facility.
|
METHODOLOGY
For the assessment of machinery
and equipment, we used as supporting documentation, the appraisal report performed by APSIS in September 2009 (date of value), where at the time held the market assessment and determining the useful life of the entire database of assets companies
valued according to the character of relevance. The final values found in September 2009 have been depreciated to the date of June 30, 2011, and market adjustments were calculated from this results.
The method used consists of achieving the value of new, equal or similar machines and/or equipment through market research done with manufacturers,
suppliers and/or representatives, in addition to, as the case may be, assembly, installation and transportation expenses.
We adopted a
simplified model by virtue of the size of the data base analyzed (1,938 thousand items), which consisted in grouping assets per operating functional unit.
After connecting all items to functional units, we adopted the following appraisal criteria/premises:
For all equipment deemed obsolete, with no market value, MODERN EQUIVALENT value will be contemplated.
The functional classes devised by APSIS defined technology used per demand, and not per manufacturer or model, seeing that, with regards to the market,
technology is within the reach of all, and values are similar among manufacturers.
The relevant equipment was selected per functional class
to be quoted with manufacturers, or the equivalent, comprised in the very data bank supplied, with purchase date being 2008.
A correction
factor was used for each functional class per sampling, with reference to the relevant equipment quoted being used and adopting the premise that the value of all equipment belonging to the same functional class is affected in the same manner.
The economic useful life of fixed assets installed on the plant was defined as per field visitations and data collected from the
manufacturers themselves. We contemplated the following factors for assessing economic useful life: the need of replacement due to technological advances per demand, competition, market trends and the very useful life of the equipment.
Therefore, we arrived at the following probable estimates, per engineering group:
|
|
|
|
|
- Commutation => 10 years
- Transmission => 10 years
- Infrastructure => 20 years, with towers being = 25 years
- Access Network => 10 years
- Termination => 10 years
|
|
|
Some non-relevant functional classes were identified and therefore associated to other classes alike,
namely:
CRITERIA FOR REPLACEMENT VALUE ASSESSMENT– NON-RELEVANT CLASSES
|
|
|
|
|
CLASSES
|
|
CLASS AVERAGE
|
|
|
|
|
CAB, C-B, C-O
|
|
C-CG, C-M, C-P
|
|
|
|
|
CEL-, CEL-A
|
|
CEL-B
|
|
|
|
|
D-DEL, D-E
|
|
D-DO
|
|
|
|
|
SAT-A, SAT-E
|
|
D-DO, D-DEL, D-MO, D-MUL, D-RO
|
|
|
|
|
E-B, E-T
|
|
E-A, E-G, E-R
|
|
|
|
|
F-I, S-A
|
|
C-G, C-M, C-P, T-A, T-ANA, T-DEL, T-DO
|
|
|
|
|
T-E, T-O
|
|
T-A, T-ANA, T-DEL, T-DO
|
|
|
|
|
TE-CP, TE-O, TE-VC, TE-WLL, TE-DA, TE-DEL
|
|
TE-AS, TE-TP
|
The current value of each equipment was achieved by contemplating replacement value depreciation on the basis of new
economic useful life from the date of purchase.
With regards to installations, the same were assessed as an integrating part of their
respective equipment.
ATTACHMENT 3
REAL ESTATE VALUATION
The technical procedures used in the report prepared by APSIS are in accordance with the criteria set forth by
Appraisal Standards NBR 14653-1:2001 and NBR 14653-2:2004 of ABNT - Brazilian Association
of Technical Standards
, and appraisal calculations to assess market values were prepared on the basis of the evolutive method (direct market data comparative method for land, and cost quantification method for buildings and improvements) and on
the basis of the direct market data comparative method.
Furthermore, the reports comply with the specifications and criteria set forth by
Appraisal Standards NBR 14653-1:2001, NBR 14653-2:2004 and NBR 14653-5:2004 of ABNT - Brazilian Association of Technical Standards and with the specifications and criteria set forth by USPAP (Uniform Standards of Professional Appraisal Practice), in
addition to requirements imposed by different bodies, such as: the Ministry of Treasury, Central Bank, Bank of Brazil, CVM (Brazilian equivalent of the Securities and Exchange Commission), SUSEP (Superintendence of Private Insurance), RIR/99 (Income
Tax Regulation/99), etc. The postulates comprised in the Professional Codes of Ethics set forth by CONFEA - Federal Council of Engineering, Architecture and Agronomy and by the Institute of Legal Engineering have also been complied with.
1. METHODOLOGY FOR REAL ESTATE APPRAISAL
The methodology used in the reports is described as follows.
1.1 ASSESSMENT OF THE REAL
ESTATE’S VALUE - EVOLUTIVE METHOD
This method defines the total value of the real estate on the basis of a combination between the direct
comparative method for assessing the value of land and the cost of reproduction method for assessing the value of improvements.
DIRECT
COMPARATIVE METHOD (Handling by Factors) - LAND
DEFINITION
This method defines land value by comparing market data from similar land. Firstly, market research is carried out aiming at producing a representative sampling of market data on land with features,
inasmuch as possible, similar to that under appraisal through the use of all available data. This stage, which involves research structures and strategies, starts with the profiling and outlining of the market under analysis upon the assistance of
existing theories and concepts or hypotheses originated from experiences acquired by the appraiser on value formation. Within research structure, variables are chosen which, in principle, are relevant for explaining value formation, and presumed
relations between them and dependent variables have been established. Researched items are then submitted to technical unification through the assistance of approved empirical weighting factors, which aim at weighting the features and qualities of
the data researched.
IDENTIFICATION OF THE SAMPLE’S VARIABLES
Dependent variables
In order to correctly specify dependent variables, market investigation in
connection to their behavior and to ways in which prices are expressed (for instance, total or unit price, reference currency, payment forms) is required, as well as observation of measurement unit unification.
Independent variables
Independent variables
refer to physical features (for instance, area, façade), location features (such as district, street, avenue, distance to pole of influence, among others), and economic features (such as bid or transaction, business period and condition - in
cash or in installments). They must be chosen on the basis of existing theories, knowledge acquired, common sense and other features which have revealed themselves important during performance of our work, as some variables contemplated during
research planning may have revealed themselves to be of little relevance or vice-versa. Whenever possible, adoption of quantitative variables is recommended.
UNIFICATION FACTORS NORMALLY USED IN THE REPORTS
According to Appraisal Standard NBR 14653-2:2004
of ABNT, for foundation level I to be attained, the adjustment interval acceptable for each factor or set of factors is 0,50 to 1,50. The following factors were used in this appraisal:
F1 - Bid Factor
This factor has been adopted for items under bid, bearing in mind that it normally suffers a value reduction for the purpose of closing the deal. It varies from 0,8 to 1,0.
F2 - Transposition Factor
It has been adopted
for the purpose of unifying researched items with the real estate under appraisal, in function of the relative location thereof.
F3 - Area
Factor
It has been adopted for the purpose of unifying researched items with the real estate under appraisal, in function of the relative
area thereof.
ü
F3 = (s/S)
1/4
Where: s = area of researched item
S= area of real estate under appraisal
When variation between two areas is less
than 30%; or
ü
F3 = (s/S)
1/8
When variation between two areas is over 30%.
F4 - Topography Factor
It has been adopted to
unify researched items with the real estate under appraisal in function of the relative topography thereof.
F5 - Frontage Factor
It has been adopted to unify researched items with the real estate under appraisal, in function of the relative frontage thereof.
ü
F5 =
(TA/Ta)
1/4
Where: TA = frontage of the real estate under appraisal
Ta = frontage of the researched item
With expression being limited to the interval of 0,5 <= TA/Ta >= 2,0
After unification,
these values are subject to a statistical treatment for assessment of the unit value to be adopted for the real estate under appraisal.
After
researched items have been duly unified, Student’s Percentile-T Method is adopted for assessing the arbitration field with 80% confidence. Within this interval, the appraiser, at his discretion, adopts the unit value deemed appropriate. This
value is multiplied by the constructed area of the real estate under appraisal, with the value thereof thus being arrived at.
COST
QUANTIFICATION METHOD - BUILDINGS AND IMPROVEMENTS
The cost quantification method determines value on the basis of the cost of reproduction
minus depreciation of buildings and improvements, with all original features or re-allocation thereof being observed, and depreciation due to physical deterioration, functionality and economic/external obsolescence being contemplated.
The unit value (new value) for buildings and construction is defined through the adoption of the basic unit
cost of construction, which is determined by inquiries made to specialized magazines on civil construction indexes and costs (PINI EDITORS). This value is multiplied by the equivalent construction area thereof.
A percentage relative to factors not included in the cost of construction, such as: BDI (Indirect Costs and Profits) rate, project cost, fees, etc., is
added to this sum, with the building’s cost of production minus depreciation being thus established.
Depreciation results from the
items’ wear and tear. Functional obsolescence occurs in function of a decrease in value based on the internal condition of the real estate, produced by inadequate design, materials, or processes, which give rise to inadequacies, capability,
cancellation or exceeding operational costs.
Economic/external obsolescence is an irreparable injury to the value of buildings and
improvements, caused by unfavorable conditions of the local economy and industrial sector, such as: unavailability of funding, loss of sources of raw material and manpower, lack of efficient transportation, change of trade center, change in
legislation and change in customs.
A depreciation factor set forth by the
Ross-Heidecke Method
(in function of the state of
conservation and apparent age of the building) is applied to the prior achieved cost of reproduction of the building, with the building’s cost of reproduction minus depreciation being thus arrived at.
CALCULATION OF THE REAL ESTATE’S FINAL VALUE
The market value for the purchase and sale of the real estate will be achieved through the sum of land, construction and improvement quotas. If the resulting value is not appropriate to the status of the
real estate market of the region within the segment under analysis, a trade factor has been adopted.
1.2 DIRECT COMPARATIVE METHOD (Handling
by Factors)
DEFINITION
This method
defines land value by comparing market data from similar land. Firstly, market research is carried out aiming at producing a representative sampling of market data on real estate with features, inasmuch as possible, similar to that under appraisal
through the use of all available evidence. This stage, which involves research structures and strategies, starts with the profiling and outlining of the market under analysis upon the assistance of existing theories and concepts or hypotheses
originated from experiences acquired by the appraiser on value formation. Within research structure, variables are chosen which, in principle, are relevant for explaining value formation, and presumed relations between them and dependent variables
have been established. Researched items are then submitted to technical unification through the assistance of approved empirical weighting factors, which aim at weighting the features and qualities of the data researched.
IDENTIFICATION OF THE SAMPLE’S VARIABLES
Dependent variables
In order to correctly specify dependent variables, market investigation in
connection to their behavior and to ways in which prices are expressed (for instance, total or unit price, reference currency, payment forms) is required, as well as observation of measurement unit unification.
Independent variables
Independent variables
refer to physical features (for instance, area, façade), location features (such as district, street, avenue, distance to pole of influence, among others), and economic features (such as bid or transaction, business period and condition - in
cash or in installments). They must be chosen on the basis of existing theories, knowledge acquired, common sense and other features which have revealed themselves important during performance of our work, as some variables contemplated during
research planning may have revealed themselves to be of little relevance or vice-versa. Whenever possible, adoption of quantitative variables is recommended.
UNIFICATION FACTORS NORMALLY USED IN THE REPORTS
According to Appraisal Standard NBR 14653-2:2004 of ABNT, for foundation level I to be attained, the adjustment interval acceptable for each factor or set of factors is 0,50 to 1,50. The following factors
were used in this appraisal:
F1 - Bid Factor
This factor has been adopted for items under bid, bearing in mind that it normally suffers a value reduction for the purpose of closing the deal. It varies from 0,8 to 1,0.
F2 - Transposition Factor
It has been adopted
for the purpose of unifying researched items with the real estate under appraisal, in function of the relative location thereof.
F3 - Area
Factor
It has been adopted for the purpose of unifying researched items with the real estate under appraisal, in function of the relative
area thereof.
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|
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F3 = (s/S)
1/4
when
variation between two areas is less than 30%; or
F3 =
(s/S)
1/8
when variation between two areas is over 30%; Where:
s
= area of researched item
S
= area of real estate under appraisal
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F4 - Age Factor
It has been adopted to unify researched items with the real estate under appraisal, in function of the relative age thereof.
F5 - Construction Pattern Factor
It has been adopted to unify researched items with the real
estate under appraisal, in function of the construction pattern thereof.
After being unified, these values are subject to a statistical
treatment for assessment of the unit value to be adopted for the real estate under appraisal.
After researched items have been duly unified,
Student’s Percentile-T Method is adopted for assessing the arbitration field with 80% confidence. Within this interval, the appraiser, at his discretion, adopts the unit value deemed appropriate. This value is multiplied by the constructed area
of the real estate under appraisal, with the value thereof thus being arrived at.
ATTACHMENT 4
ABL - Gross Leasable Area
ABNT - Brazilian Technical Standards Association
Allocated Codes - serial number (grades or
weights) to differentiate the quality features of properties.
Allotment - subdivision of a tract of land into lots for buildings with the
opening of new thoroughfares, or the extension, modification or expansion of existing ones.
Amortization - systematic allocation of the
depreciable value of an asset over its useful life.
Apparent Age - estimated age of a property according to its characteristics and
conservation status at the time of inspection.
Asset - a resource controlled by the entity as a result of past events from which future
economic benefits are expected for the entity.
Asset Approach - valuation of companies where all assets (including those not accounted for)
have their values adjusted to the market. Also known as market net equity.
Base Date - specific date (day, month and year) of application of
the assessment value.
Basic Infrastructure - urban rainwater drainage equipment, street lighting, sewage system, drinking water, public and
home electricity supply and access routes.
BDI - a percentage that indicates the benefits and overhead costs applied to the direct cost of
construction.
Best Use of the Property - the most economically appropriate use of a certain property according to its characteristics and
surroundings, respecting legal limitations.
Beta - a systematic risk measure of a share; price trend of a particular share to be correlated with
changes in a given index.
Book Value - the value at which an asset or liability is recognized on the balance sheet.
Building Standard - the quality of the improvements according to the specifications of design, materials, workmanship and performance effectively used in
construction.
Business Combination - union of separate entities or businesses producing financial statements of a single reporting entity.
Transaction or other event by which an acquirer obtains control of one or more businesses, regardless of the legal form of operation.
Business Risk - uncertainty of realization of expected future returns of the business resulting from factors other than financial leverage.
CAPEX (Capital Expenditure) - fixed asset investments.
Capitalization - conversion of a simple period of economic benefits into value.
CAPM (Capital
Asset Pricing Model) - model in which the capital cost for any share or lot of shares equals the risk free rate plus risk premium provided by the systematic risk of the share or lot of shares under investigation. Generally used to calculate the Cost
of Equity or the Cost of Shareholder Capital.
Capitalization Rate - any divisor used to convert economic benefits into value in a single
period.
Capital Structure - composition of a company’s invested capital, between own capital (equity) and third-party capital (debt).
Cash Flow - cash generated by an asset, group of assets or business during a given period of time. Usually the term is supplemented by a
qualification referring to the context (operating, non-operating, etc...).
Cash Flow on Invested Capital - cash flow generated by the company to be reverted to lenders (interest and
amortizations) and shareholders (dividends) after consideration of cost and operating expenses and capital investments.
Cash-Generating Unit
- smallest identifiable group of assets generating cash inflows that are largely independent on inputs generated by other assets or groups of assets.
Casualty - an event that causes financial loss.
Company - commercial or industrial entity,
service provider or investment entity holding economic activities.
Conservation Status - physical status of an asset in result of its
maintenance.
Control - power to direct the strategic policy and administrative management of a company.
Control Premium - value or percentage of the pro-rata value of a lot of controlling shares over the pro-rata value of non-controlling shares, which
reflect the control power.
Cost - the total direct and indirect costs necessary for production, maintenance or acquisition of an asset at a
particular time and situation.
Cost of Capital - Expected rate of return required by the market as an attraction to certain investment funds.
CPC - Accounting Pronouncements Committee.
Current Value - value replacement with a new value depreciated as a result of the physical state the property is in.
CVM - Securities and Exchange Commission.
Damage - damage caused to others by the occurrence of flaws, defects, accidents and crimes, among others.
Data Treatment - application of operations to express, in relative terms, the attribute differences between the market data and data of the property being assessed.
Date of Issue - closing date of the valuation report, when conclusions are conveyed to the client.
DCF (Discounted Cash Flow) - discounted cash flow.
D & A - depreciation and amortization.
Dependent Variable - variable to be explained by the
independent ones.
Depreciable Value - cost of the asset, or other amount that substitutes such cost (financial statements), less its residual
value
Depreciation - systematic allocation of the depreciable value of an asset during its useful life.
Dichotomous Variable - variable that assumes only two values.
Direct Production Cost - spending on inputs, including labor, in the production of goods.
Discount for Lack of Control - value or percentage deducted from the pro-rata value of 100% of the value of a company that reflects the absence of part
or all of the control.
Discount for Lack of Liquidity - value or percentage deducted from the pro-rata value of 100% of the value
of a company that reflects the lack of liquidity.
Discount Rate - any divisor used to convert a flow of future economic benefits into present
value.
Drivers - value drivers or key variables.
EBIT (Earnings before Interest and Taxes) - earnings before interest and taxes.
EBITDA (Earnings
before Interest, Taxes, Depreciation and Amortization) - earnings before interest, taxes, depreciation and amortization.
Economic Benefits -
benefits such as revenue, net profit, net cash flow, etc.
Efficient Use - that which is recommendable and technically possible for the
location on a reference date, among the various uses permitted by the applicable law, observing surrounding marketing trends.
Electrical
Damage Value - estimated cost of the repair or replacement of parts, when the property suffers electrical damage. Values are tabulated in percentages of the Replacement Value and have been calculated through the study of equipment manuals and the
expertise in corrective maintenance of Apsis technicians.
Enterprise - set of properties capable of producing revenue through marketing or
economic exploitation. It can be: real estate (e.g. subdivision, commercial / residential buildings), real-estate based (e.g., hotel, shopping mall, theme parks), industrial or rural.
Enterprise Value - economic value of the company.
Equity Value - economic value of the equity.
Equivalent Construction Area - constructed area on which the unit cost equivalence of corresponding construction is applied, according to
ABNT postulates.
Equivalent Depth - numerical result of the division of a lot area by its main projected front.
Expertise - technical activity performed by a professional with specific expertise to investigate and clarify facts, check the status of property,
investigate the causes that motivated a particular event, appraise assets, their costs, results or rights.
Facilities - set of materials,
systems, networks, equipment and operational support services for a single machine, production line or plant, according to the degree of aggregation.
Fair Market Value - value at which an asset could have its ownership exchanged between a potential seller and a potential buyer, when both parties have reasonable knowledge of relevant facts and neither
is under pressure to do so.
Fair Value Less Cost to Sell - value that can be obtained from the sale of an asset or cash-generating unit less
sale expenses, in a transaction between knowledgeable, willing and uninterested parties.
FCFF (Free Cash Flow to Firm) - Free cash flow to
firm, or unlevered free cash flow.
Financial Lease - that which substantially transfers all the risks and benefits related to the ownership
of the asset, which may or may not eventually be transferred. Leases that are not financial leases are classified as operating leases.
Fixed
Asset - tangible asset available for use in the production or supply of goods or services, in third-party leasing, investments, or for management purposes, expected to be used for more than one accounting period.
Flaw - anomaly that affects the performance of products and services, or makes them inadequate to the purposes intended, causing inconvenience or
material loss to the consumer.
Forced Liquidation - condition on the possibility of a compulsory sale or in a shorter period than the
average absorption by the market.
Free Float - percentage of outstanding shares on the company’s total capital.
Frontage - horizontal projection of the line dividing the property and the access road; measurement of the front of a building.
Goodwill - see Goodwill based on the expectation of future profitability (goodwill).
Homogenization - treatment of observed prices by application of mathematical transformations that express, in relative terms, the differences between market data attributes and those of the property
assessed.
Homogenized Area - useful or private area, or built with mathematical treatments for valuation purposes, according to criteria
based on the real estate market.
IAS (International Accounting Standards) - International Accounting Standards.
IASB (International Accounting Standards Board) - International Accounting Standards Board.
Ideal Fraction - percentage owned by each of the buyers (tenants) of the land and of the building’s common items.
IFRS (International Financial Reporting Standards) - International Financial Reporting Standards, a set of international accounting pronouncements published and reviewed by the IASB.
Impairment - see Losses on devaluation
Impairment Losses (impairment) - book value of the asset that exceeds, in the case of
stocks, its selling price less the cost to complete it and expense of selling it; or, in the case of other assets, their fair value less expenditure for sale.
Income Approach - valuation method for converting the present value of expected economic benefits.
Independent Variables - variables that provide a logical content to the formation of the value of the property subject to the assessment.
Indirect Production Cost - administrative and financial costs, benefits and other liens and charges necessary for the production of goods.
Influence Point - atypical point that, when removed from the sample, significantly changes the estimated parameters or the linear structure of the model.
Insurance - risk transfer guaranteed by contract whereby one party undertakes, subject to payment of premium, to indemnify another for the
occurrence of casualties covered under the policy.
Insurance Value - value at which an insurance company assumes the risks, and does not
apply to the land and foundations, except in special cases.
Intangible Asset - identifiable non-monetary asset without physical substance.
This asset is identifiable when: it is separable, i.e., capable of being separated or divided from the entity and sold, transferred, licensed, leased or exchanged, either alone or together with the related contract, asset or liability; or originates
from contractual rights or other legal rights regardless of their being transferred, separable from the entity or from other rights and obligations.
Internal Rate of Return - discount rate where the present value of future cash flow is equivalent to the cost of investment.
International Accounting Standards - standards and interpretations adopted by the IASB. They include:
International Financial Reporting Standards (IFRS) International Accounting Standards (IAS) and interpretations developed by the Interpretation Committee on International Financial Reporting Standards (IFRIC) or by the former Standing
Interpretations Committee (SIC).
Invested Capital - the sum of own capital and third-party capital invested in a company. Third-party capital
is usually related to debt with interest (short and long-term) and must be specified within the context of the valuation.
Investment Property
- property (land, building or building part, or both) held by the owner or lessee under the lease, both to receive payment of rent and for capital appreciation or both, other than for: use in the production or supply of goods or services, as well as
for administrative purposes.
Investment Value - value for a particular investor based on individual interests in the property in question. In
the case of business valuation, this value can be analyzed by different situations, such as the synergy with other companies of an investor, risk perceptions, future performance and tax planning.
Key Money - amount paid by the prospective tenant for signature or transfer of the lease contract, as compensation for the point of sale.
Key Variables - variables that, a priori, and traditionally have been important for the formation of property value.
Levered Beta - beta value reflecting the debt in capital structure.
Liability - present obligation that arises from past events, whereby it is hoped that the settlement thereof will result in the inflow of funds from the entity embodying economic benefits.
Liquidation Value - value of a property offered for sale on the market outside the normal process, i.e. one that would be established if the property
were offered for sale separately, taking into account the costs involved and the discount required for a sale in a reduced period.
Liquidity
- ability to rapidly convert certain assets into cash or into the payment of a certain debt.
Market Approach - valuation method in which
multiple comparisons derived from the sales price of similar assets are adopted.
Market Data - set of information collected on the market
related to a particular property.
Marketing Factor - the ratio between the market value of an asset and its reproduction cost less
depreciation or replacement cost, which may be higher or lower than 1 (one).
Market Research - set of activities for identification, investigation, collection, selection, processing,
analysis and interpretation of results on market data.
Maximum Insurance Value - maximum value of the property for which it is recommendable
to insure it. This criterion establishes that the property whose depreciation is greater than 50% should have its Maximum Insurance Value equivalent to twice as much as the Current Value; and the property whose depreciation is with less than 50%
should have its Maximum Insurance Value equivalent to the Replacement Value.
Multiple - market value of a company, share or invested capital,
divided by a valuation measurement of the company (EBITDA, income, customer volume, etc...).
Net Debt - cash and cash equivalents, net
position in derivatives, short-term and long-term financial debts, dividends receivable and payable, receivables and payables related to debentures, short-term and long-term deficits with pension funds, provisions, and other credits and obligations
to related parties, including subscription bonus.
Non-Operating Assets - those not directly related to the company’s operations (may or may not generate
revenue) and that can be disposed of without detriment to its business.
Null hypothesis in a regression model - hypothesis in which one or a
set of independent variables involved in the regression model are not important to explain the variation of the phenomenon in relation to a pre-established significance level.
Operating Assets - assets that are basic to the company’s operations.
Operating Lease -
that which does not substantially transfer all the risks and benefits incidental to the ownership of the asset. Leases that are not operating leases are classified as financial leases.
Parent Company - an entity that has one or more subsidiaries.
Perpetual Value - value at the end
of the projective period to be added on the cash flow.
Point of Sale - intangible asset that adds value to commercial property, due to its
location and expected commercial exploitation.
Population - total market data of the segment to be analyzed.
Premium for Expected Future Profitability (goodwill) - future economic benefits arising from assets not capable of being individually identified or
separately recognized.
Present Value - the estimated present value of discounted net cash flows in the normal course of business.
Price - the amount by which a transaction is performed involving a property, a product or the right thereto.
Private Area - useful area plus building blocks (such as walls, pillars, etc.) and elevator hallway (in
specific cases).
Property - something of value, subject to use, or that may be the object of a right, which integrates an equity.
Qualitative Variables - variables that cannot be measured or counted, only ordered or ranked, according to attributes inherent to the property (e.g.,
building standard, conservation status and quality of the soil).
Quantitative Variables - variables that can be measured or counted (e.g.,
private area, number of bedrooms and parking spaces).
Range for Real Estate Valuations - range in the vicinity of the point estimator adopted
in the valuation within which to arbitrate the value of the property provided it is justified by the existence of features that are not contemplated in the model.
Re (Cost of Equity) - return required by shareholders for the capital invested.
Real Estate -
property, consisting of land and any improvements incorporated thereto. Can be classified as urban or rural, depending on its location, use or to its highest and best use.
Recoverable Value - the highest fair value of an asset (or cash-generating unit) minus the cost of sales compared with its value in use.
Rd (Cost of Debt) - a measure of the amount paid for the capital earned from third parties, in the form of loans, financing, market funding, among others.
Reference Real Estate - market data with features comparable to the property assessed.
Regression Model - the model used to represent a specific phenomenon, based on a sample, considering the
various influencing characteristics.
Remaining Life - Property’s remaining life.
Replacement Cost - a property’s reproduction cost less depreciation with the same function and features comparable to the property assessed.
Replacement Value for New - value based on what the property would cost (usually in relation to current market prices) to be replaced with or
substituted by a new, equal or similar property.
Reproduction Cost - expense required for the exact duplication of a property, regardless of
any depreciation.
Reproduction Cost Less Depreciation - a property’s reproduction cost less depreciation, considering the state it is
in.
Residual Value - value of new or used asset projected for a date limited to that in which it becomes scrap, considering its being in
operation during the period.
Residual Value of an Asset - estimated value that the entity would obtain at present with the sale of the asset,
after deducting the estimated costs thereof, if the asset were already at the expected age and condition at the end of its useful life.
Sample - set of market data representative of a population.
Scrap Value - market value of a property’s reusable materials in disabling conditions, without their being used for production purposes.
Shareholders’ Equity at Market Prices - see Assets Approach.
Statistical Inference - part
of statistical science that allows drawing conclusions about the population from a sample.
Subsidiary - entity, including that with no legal
character, such as an association, controlled by another entity (known as the parent company).
Supporting Documentation - documentation
raised and provided by the client on which the report premises are based.
Survey - evidence of local events through insightful observations
in a property and of the factors and conditions that constitute or influence it.
Tangible Asset - physically existing asset, such as land,
building, machinery, equipment, furniture and tools.
Technical Report - detailed report or technical clarification issued by a legally
qualified
and trained professional on a specific subject.
Total Construction Area - resulting
from the sum of the real private area and the common area allocated to an independent unit, defined according to ABNT.
Urbanizable Land -
land eligible to receive urban infrastructure works aiming at its efficient use, by means of the subdivision, split or implementation of a business.
Useful Area - real private area subtracted from the area occupied by walls and other building blocks that prevent or hinder its use.
Useful Economic Life - the period in which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset by the entity.
Valuation - act or process of determining the value of an asset.
Valuation Methodology - one or more approaches used in developing evaluative calculations for the indication of the value of an asset.
Value at Risk - representative value of the share of the property one wishes to insure and that may correspond to the maximum insurable value.
Value in Use - value of a property in operating conditions in its present state, such as the useful part of an industry, including, where
relevant, the costs of design, packaging, taxes, freight and installation.
Value Plan - the graphic representation or listing of generic
square meter values of land or of the real estate on the same date.
WACC (Weighted Average Cost of Capital) - model in which capital cost is
determined by the weighted average of the market value of capital structure components (own and others).
Annex III
Analysis of Equitable Treatment of the Corporate Reorganization
Exhibit 2.2
PROTOCOL AND JUSTIFICATION FOR PARTIAL SPLIT-OFF OF TELEMAR NORTE LESTE S.A. WITH THE ACQUISITION OF THE SPLIT OFF PORTION BY COARI PARTICIPAÇÕES S.A. AND THE SHARE EXCHANGE BETWEEN
TELEMAR NORTE LESTE S.A. AND COARI PARTICIPAÇÕES S.A.
Through this private deed,
TELEMAR NORTE LESTE S.A.
, a publicly-held company with head offices at Rua General Polidoro 99, Botafogo, City and State of Rio de Janeiro,
registered with the Treasury Ministry on the National Corporate Taxpayers’ Resgister under CNPJ/MF No. 33,000.118/0001-79, represented herein as set forth in its corporate by-laws (“TMAR”);
COARI PARTICIPAÇÕES S.A.
, a publicly-held company with head offices at Rua Humberto de Campos 425, 8
th
floor - part, City and State of Rio de Janeiro, registered with the
Treasury Ministry on the National Corporate Taxpayers’ Register under CNPJ/MF No. 04.030.087/0001-09, represented herein as set forth in its corporate by-laws (“Coari”);
TMAR and Coari, together called simply the “Parties” or “Companies”.
WHEREAS:
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(i)
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TMAR is a publicly-held company that is the controlling shareholder of Coari, whose purpose is to provide telecommunications services and perform other activities that
are necessary or useful for the provision of such services, in compliance with the concessions, authorizations and permits granted thereto.
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(ii)
|
Coari is a publicly-held company that is the controlling shareholder of Brasil Telecom S.A. (“BRT”), whose purpose is to (i) control companies providing
fixed public telephony services; (ii) promote, through subsidiary or associated companies, the expansion and implementation of fixed telephony services in its respective concession area; (iii) promote, undertake or guide the acquisition of
funds from domestic and foreign sources, to be allocated by Coari or by its subsidiaries; (iv) promote and encourage research activities and studies addressed to the development of the fixed telephony sector; (v) provide either directly or
through subsidiary or associated companies, specialized technical services related to the fixed telephony area; (vi) promote, encourage and coordinate, either directly or through subsidiary or associated companies, the training or qualification
of the personnel required by the fixed telephony sector; (vii) undertake or arrange the importation of goods and services for or through subsidiary or associated companies; (viii) perform other similar activities or activities correlated
to its corporate purpose; and (ix) hold stakes in the capital of other companies;
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(iii)
|
On May 24, 2011, the Parties, together with BRT and Tele Norte Leste Participações S.A. (“TNL” and together with TMAR,
Coari and BRT, the “Oi Companies”), disclosed a Statement of Material Fact to the market in which they announced approval by the prior meeting of the shareholders of
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TNL’s parent company Telemar Participações S.A. (“TmarPart”), of instructions to the managements of the Oi Companies to conduct studies and take the steps required to
implement a corporate reorganization of the Oi Companies, consisting of (i) the Share Exchange (as defined below) between TMAR and Coari, (ii) the merger of Coari into BRT, and (iii) the merger of TNL into BRT (collectively the
“Corporate Reorganization”);
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(iv)
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On August 1, 2011, the Oi Companies disclosed a Statement of Material Fact to the market in which they announced that the Independent Special Committees of TNL,
TMAR and BRT had provided recommendations to the Boards of Directors of the Oi Companies with respect to the exchange ratios in connection with the Corporate Reorganization. On August 17, 2011, the Oi Companies disclosed a Statement of Material
Fact to the market in which they announced that the Boards of Directors of the Oi Companies had determined the exchange ratios applicable to the Corporate Reorganization;
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(v)
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The Oi Companies have extremely complex shareholder bases, which are currently dispersed among three publicly-traded companies with a total of seven different classes
of publicly traded shares;
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(vi)
|
The Corporate Reorganization is intended to simplify the corporate structure and governance of the Oi Companies by consolidating the shareholder bases of the Oi
Companies in one public company with two classes of shares that will be traded in Brazil and abroad, eliminating operating costs and overhead while enhancing liquidity for all the shareholders of the Oi Companies;
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(vii)
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In light of the effects of the Corporate Reorganization on the Oi Companies and their shareholders, the Split-Off (as defined below) is in the best interest of the Oi
Companies because it is intended to result in a better distribution of the book value of the equities between BRT (which will acquire the assets and liabilities of Coari) and TMAR (which will become a wholly-owned subsidiary of BRT) considering that
both companies provide fixed-line telecommunications services, in accordance with the concessions and authorizations granted by the Brazilian Telecommunications Industry Regulator (“ANATEL”), without affecting the exchange ratios proposed
by the Independent Special Committees and approved by the Boards of Directors of the Oi Companies, as the exchange ratios were negotiated and established based on market values;
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(viii)
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The Split-Off and the Share Exchange will result, jointly, in the distribution by Coari of one Coari common share of Coari in substitution for each outstanding TMAR
common share and one preferred share of Coari in substitution for each outstanding Class A or Class B preferred share of TMAR, and therefore these transactions will not affect the exchange ratios negotiated by the Independent Special Committees
and approved by the Boards of Directors of the Oi Companies.
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Being in full and fair agreement, the Parties hereby execute this
Protocol and Justification for Partial Split-Off of Telemar Norte Leste S.A. with the Acquisition of the Split-Off Portion by Coari Participações S.A., and the Share Exchange between
2
Telemar Norte Leste S.A. and Coari Participações S.A. (“Protocol and Justification”), in compliance with Articles 224, 225, 229 and 252 of Law No. 6,404/76 (the
“Brazilian Corporation Law”), under the following terms and conditions.
SECTION I
PARTIAL SPLIT-OFF OF TMAR
WITH ACQUISITION OF THE PORTION SPLIT OFF BY COARI
CLAUSE ONE – PROPOSED
TRANSACTION AND JUSTIFICATION
1.1.
Proposed Transaction
. The transaction consists of a partial split-off of TMAR, through which a
portion of the TMAR equity, consisting of assets, rights and obligations described in Exhibit 1.1 of Section I hereof, will be split off (the “Split-Off Portion”), and the acquisition of the Split-Off Portion by Coari (the
“Split-Off”).
1.2.
Justification of the Split-Off
. The Split-Off is an intermediate step in the implementation of the
Corporate Reorganization and is intended to result in a better distribution of the book value of the equities between BRT (which will acquire the assets and liabilities of Coari) and TMAR (which will become a wholly-owned subsidiary of BRT)
considering that both companies provide fixed-line telecommunications services, in accordance with the concessions and authorizations granted by ANATEL, without affecting the exchange ratios proposed by the Independent Special Committees and
approved by the Boards of Directors of the Oi Companies, as the exchange ratios were negotiated and established based on market values.
CLAUSE TWO – NUMBER, TYPE AND CLASS OF SHARES TO BE DISTRIBUTED TO TMAR SHAREHOLDERS
2.1.
Number, Type and Class of Shares to be Distributed
. As a result of the Split-Off, Coari will distribute 0.001238 common shares of Coari in partial substitution for each outstanding common
share of TMAR and 0.001238 preferred shares of Coari in substitution for each outstanding Class A or Class B preferred share of TMAR. (the “Exchange Ratio for the Split-Off”).
2.2.
Criteria Used to Determine the Exchange Ratio for the Split-Off.
The Exchange Ratio for the Split-Off was determined by the managements of TMAR and Coari based on the assumption that:
(i) the Split-Off is an intermediate step in the Corporate Reorganization whose outcome may not affect the exchange ratios used in the Corporate Reorganization or cause any dilution for the TMAR shareholders; (ii) Coari is a wholly-owned
subsidiary of TMAR, (ii) the composition of the equity capital of Coari after the Split-Off and the Share Exchange will reflect the exact current composition of the equity capital of TMAR; and (iv) immediately after the Split-Off and the
Share Exchange, there will be a merger of Coari into BRT, based on the exchange ratios negotiated by the Independent Special Committees and approved by the Board of Directors of TMAR and BRT.
2.3.
Fractional Shares
. Any fractional shares resulting from the Split-Off will be consolidated in the manner set forth in Clauses 5.1.1. and 5.2.2. of this Section.
3
CLAUSE THREE – APPRAISAL CRITERIA FOR THE SPLIT-OFF PORTION
3.1.
Net Worth Appraisal
. The assets and liabilities constituting the Split-Off Portion were appraised at their book value by Apsis Consultoria
Empresarial Ltda., with head offices at Rua São José 90, suite 1,082, in the City and State of Rio de Janeiro, registered with the Treasury Ministry on the National Corporate Tax-Payers’ Roll under CNPJ/MF
No. 27.281.922/0001-70 (“Apsis”), based on the audited Equity Balance Sheet of TMAR as of June 30, 2011 (the “Base Date”), and are listed at book value in the Appraisal Report on the Split-Off Portion appended to this
Protocol and Justification as Exhibit 3.1. of Section I hereof (“Split-Off Portion Appraisal Report”). The selection and engagement of Apsis must be ratified and approved by the shareholders of TMAR and Coari. As set forth in the Split-Off
Portion Appraisal Report, the book value of the Split-Off Portion on the Base Date was R$296,334,327.87 (two hundred ninety-six million, three hundred thirty-four thousand, three hundred twenty-seven
reais
and eighty-seven
centavos
).
3.2.
Treatment of Equity Variations
. Any equity variations occurring in the Split-Off Portion as from the Base Date until the date of
the approval of the Share Exchange will be absorbed directly by Coari.
CLAUSE FOUR – SHARES OF ONE COMPANY HELD BY ANOTHER COMPANY
AND SHARES HELD IN TREASURY
4.1.
Treatment of Shares of One Company held by Another Company
. Any shares issued by Coari that are
held by TMAR will be cancelled in connection with the Split-Off. There are no shares issued by TMAR which are held by Coari.
4.2.
Treatment of Shares Held in Treasury
. Coari does not hold any of its shares in treasury. All of the shares issued by TMAR held in treasury will be cancelled upon the approval of the transaction.
CLAUSE FIVE – NO CHANGE TO THE EQUITY CAPITAL OF TMAR AND REDUCTION IN THE EQUITY CAPITAL OF COARI
5.1.
Equity Capital of TMAR Following the Split-Off
. The reduction of the net equity of TMAR resulting from the Split-Off and transfer of the
Split-Off Portion to Coari will be accounted for as a reduction of the capital reserve account and, therefore, will not result in any change in the equity capital of TMAR. The Split-Off will not result in the cancellation of any TMAR shares.
5.2.
Reduction in the Equity Capital of Coari
. The acquisition of the Split-Off Portion by Coari will result in a reduction in the
equity capital of Coari in an amount equal to of R$14,358,752,355.06 (fourteen billion, three hundred fifty-eight million, seven hundred fifty-two thousand, three hundred fifty-five
reais
and six
centavos
) corresponding to the portion
of the net debt of TMAR described in Exhibit 1.1 of Section I hereof, through the absorption of the Split-Off Portion by Coari. As a result of the reduction in the Equity Capital of Coari, 161,990,001 (one hundred sixty-one million, nine hundred
ninety thousand and one) common shares and 128,675,049 (one hundred twenty-eight million, six hundred seventy-five thousand and forty-nine) preferred shares will be
4
cancelled. Furthermore, as a result of the acquisition of the Split-Off Portion by Coari, Coari will issue 190,692 (one hundred ninety thousand, six hundred ninety-two) registered common shares
and 235,252 (two hundred thirty-five thousand, two hundred fifty-two) registered preferred shares, without par value, which will be distributed in full to the current shareholders of TMAR.
5.2.1. For the purposes of the Split-Off, the net amount of the investment of TMAR in Coari of R$16,382,514,682.93 (sixteen billion, three
hundred eighty-two million, five hundred fourteen thousand, six hundred eighty-two
reais
and ninety-three
centavos
) as set forth in the Split-Off Portion Appraisal Report, will not be considered an equity variation of Coari, as this
investment is already part of the equity of Coari, as set forth in its financial statements.
5.2.2. Fractional shares issued
by Coari and distributed to individual TMAR shareholders in connection with the Split-Off will be consolidated with the fractional shares of Coari issued in connection with the Share Exchange, so that each shareholder will hold, after the Split-Off
and the Share Exchange, the same number of shares of Coari which they held of TMAR prior to the Split-Off and the Share Exchange.
5.3.
Composition of the Equity Capital of Coari After the Absorption of the Split-Off Portion by Coari
. As a result of the absorption of the Split-Off Portion by Coari, the equity capital of Coari will be R$1,430,491,287.96 (one billion, four
hundred thirty million, four hundred ninety-one thousand, two hundred eighty-seven
reais
and ninety-six
centavos
), represented by 190,692 (one hundred ninety thousand, six hundred ninety-two) common shares and 235,252 (two hundred
thirty-five thousand, two hundred fifty-two) preferred shares.
CLAUSE SIX – AMENDMENT OF THE CORPORATE BY-LAWS OF TMAR AND COARI
6.1.
Amendment of TMAR’s Corporate By-Laws
. As the Split-Off will not result in a change in the amount of TMAR’s share
capital or the number of shares issued by TMAR, it will not be necessary to amend TMAR’s corporate by-laws.
6.2.
Amendment of
Coari’s Corporate By-Laws
. In connection with the Split-Off and the Share Exchange, the corporate by-laws of Coari must be amended as provided in Clause 6.1. of Section II below.
CLAUSE SEVEN – REASONS FOR THE SPLIT-OFF
7.1.
Reasons for the Split-Off
. The
Split-Off is an intermediate step in the implementation of the Corporate Reorganization, and the managements of the Oi Companies believe that it furthers the best interests of the Oi Companies and their shareholders as it will result in a better
distribution of the book value of the equities between BRT (which will acquire the assets and liabilities of Coari) and TMAR (which will become a wholly-owned subsidiary of BRT) considering that both companies provide fixed-line telecommunications
services, in accordance with the concessions and authorizations granted by ANATEL, without affecting the exchange ratios proposed by the Independent Special Committees and approved by the Board of Directors of the Oi
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Companies, as the exchange ratios were negotiated and established based on market values.
CLAUSE EIGHT – ALLOCATION OF THE VALUE OF THE SPLIT-OFF PORTION
8.1.
Allocation of the Split-Off Portion.
As a result of the absorption of the Split-Off Portion by Coari, the equity capital of Coari will be reduced by an amount equal to R$14,358,752,355.06
(fourteen billion, three hundred fifty-eight million, seven hundred fifty-two thousand, three hundred fifty-five
reais
and six
centavos
), and an amount equal to R$1,727,428,000.00 (one billion, seven hundred twenty-seven million, four
hundred twenty-eight thousand
reais
) will be allocated to Coari’s investment reserve account.
CLAUSE NINE – TYPES OF
SHARES TO BE ISSUED TO THE TMAR SHAREHOLDERS
9.1.
Shares to be Issued to the TMAR Shareholders in the Split-Off
. The holders of
common shares of TMAR will receive common shares issued by Coari and the holders of TMAR Class A or Class B preferred shares will receive preferred shares issued by Coari. The common and preferred shares issued by Coari to TMAR shareholders
will entitle them to the same rights as those conferred by the common shares and preferred shares issued by Coari, respectively.
CLAUSE
TEN – WITHDRAWAL RIGHTS
10.1.
Withdrawal Rights of TMAR and Coari Shareholders
. Any TMAR and Coari shareholders that do not
approve the Split-Off will be guaranteed the right of withdrawal, as set forth in Clause 10.1 of Section II of this Protocol and Justification.
CLAUSE ELEVEN – APPROVAL BY THE GENERAL SHAREHOLDERS’ MEETINGS OF TMAR AND COARI
11.1.
General Shareholder’s Meetings
. In order to approve the Split-Off, General Shareholders’ Meetings of TMAR and Coari will be held to
consider the Split-Off.
SECTION II
ACQUISITION OF TMAR SHARES BY COARI
CLAUSE ONE – PROPOSED TRANSACTION AND
JUSTIFICATION
1.1.
Proposed Transaction
. The transaction consists of a share exchange between TMAR and Coari, through the transfer
of all the shares of TMAR to Coari, as a result of which TMAR will become a wholly-owned subsidiary of Coari, pursuant to Article 252 of the Brazilian Corporation Law (the “Share Exchange”).
1.2.
Justification of the Share Exchange
. The Share Exchange is one of the steps of the Corporate Reorganization, the purpose of which is to
simplify the corporate structure and governance of the Oi Companies, eliminating operating costs and overhead while enhancing liquidity for all the shareholders of the Oi Companies.
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Furthermore, the managements of the Oi Companies believe that the Share Exchange furthers the best interests of the Oi Companies and their shareholders, particularly through
(i) consolidating the shareholder bases of the Oi Companies in one public company with two classes of shares that will be traded in Brazil and abroad; (ii) streamlining the reporting process with the U.S. Securities and Exchange Commission
(the “SEC”) by enabling the merger of Coari into BRT and transforming TMAR into a wholly-owned subsidiary of BRT, which is the only Oi Company which currently has both common and preferred shares listed in Brazil and New York (through its
American Depositary Receipt (“ADR”) programs); (iii) aligning the interests of the shareholders of TMAR, Coari and BRT; and (iv) promptly eliminating the costs of separate listings of the shares of TMAR and Coari, as well as
costs arising from separately complying with the public disclosure requirements applicable to TMAR and Coari.
CLAUSE TWO – NUMBER,
TYPE AND CLASS OF SHARES TO BE DISTRIBUTED TO TMAR SHAREHOLDERS
2.1.
Number, Type and Class of Shares to be Distributed
. As a
result of the Share Exchange, Coari will distribute 0.998762 common shares of Coari in substitution for each outstanding TMAR common share held by the shareholders of TMAR following the Split-Off and 0.998762 preferred shares of Coari in
substitution for each outstanding TMAR Class A or Class B preferred share held by the shareholders of TMAR following the Split-Off (“Exchange Ratio for the Share Exchange”).
2.2.
Criteria Used to Determine the Exchange Ratio for the Share Exchange
. The Exchange Ratio for the Share Exchange was determined by the managements of TMAR and Coari based on the assumptions
that (i) the Share Exchange is an intermediate step in the Corporate Reorganization; (ii) on this date, Coari is a wholly-owned subsidiary of TMAR; (iii) the composition of the Coari equity capital after the Share Exchange in
accordance with the Exchange Ratio for the Share Exchange will reflect the exact current composition of the equity capital of TMAR; and (iv) immediately after the Split-Off and the Share Exchange, there will be a merger of Coari into BRT, based
on the exchange ratios negotiated by the Independent Special Committees and approved by the Board of Directors of TMAR and BRT.
2.3.
Fractional Shares
. Fractional shares issued by Coari and distributed to individual TMAR shareholders in connection with the Share Exchange will be consolidated with the fractional shares of Coari issued in connection with the acquisition of
the Split-Off Portion, so that each shareholder will hold, after the Split-Off and the Share Exchange, the same number of shares of Coari which they held of TMAR prior to the Split-Off and the Share Exchange.
CLAUSE THREE – NET WORTH APPRAISAL CRITERIA FOR TMAR AND COARI
3.1.
Net Worth Appraisal
. The shares of TMAR were appraised on the basis of their book value, as set forth in the audited financial statements of TMAR as of the Base Date. Pursuant to the
provisions set forth in Articles 226 and 252 of the Brazilian Corporation Law, Apsis was selected to conduct the appraisal of the shares of TMAR that will be acquired by Coari. The selection and engagement of Apsis must be ratified and approved by
the shareholders of TMAR and Coari. As set forth in the Appraisal
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Report included in Exhibit 3.1. of Section II hereof (the “
Equity Appraisal Report on TMAR Shares
”), the book value of the net equity of TMAR on the Base Date, considering the
effects of the Spilt-Off, was R$20,468,201,465.96 (twenty billion, four hundred sixty-eight million, two hundred one thousand, four hundred sixty-five
reais
and ninety-five
centavos
), or R$59.4907 (fifty-nine
reais
and
forty-nine
centavos
and fraction) per share of TMAR.
3.2.
Appraisal of the Net Worth of TMAR and Coari at Market Prices
. In
compliance with the provisions set forth in Article 264 of the Brazilian Corporation Law, Apsis was selected to prepare the net worth appraisal report of TMAR and Coari at market prices. The appraisals of the net worth of TMAR and Coari at market
prices were prepared using the same criteria and as of the same Base Date as set forth in the Net Worth Appraisal Report at Market Prices included in Exhibit 3.2. of Section II hereof (“
Net Worth Appraisal Report at Market Prices
”),
resulting in, solely for the purposes of Article 264 of the Brazilian Corporation Law, an Exchange Ratio of 0.015398 Coari shares for each outstanding share of TMAR.
3.3.
Economic Appraisal of TMAR
. Pursuant to the provisions set forth in Article 12 of the corporate by-laws of TMAR, an independent Economic Appraisal Report on TMAR, as of the Base Date, will be
prepared for purposes of determining the reimbursement value to be paid to TMAR shareholders who exercise their withdrawal rights in connection with the Share Exchange. Pursuant to Article 45, §§ 3 and 4 of the Brazilian Corporation Law, a
general shareholders’ meeting of TMAR will be called in due course to choose the specialized company that will prepare the abovementioned report, among a list of three companies recommended by the Board of Directors of TMAR. The reimbursement
value per share to be paid in connection with the exercise of the withdrawal rights will be fully disclosed before the general shareholders’ meeting of TMAR which will consider the Share Exchange.
3.4.
Treatment of Equity Variations
. Any equity variations occurring in TMAR and Coari as from the Base Date until the date of the approval of the
Share Exchange will be absorbed directly by the respective companies.
CLAUSE FOUR – SHARES OF ONE COMPANY HELD BY ANOTHER COMPANY AND
SHARES HELD IN TREASURY
4.1.
Treatment of Shares of One Company Held by Another Company
. Any shares issued by Coari that are held
by TMAR will be canceled in connection with the Share Exchange. There are no shares issued by TMAR which are held by Coari.
4.2.
Treatment
of Shares Held in Treasury
. Neither Coari nor TMAR will hold any of its shares in treasury at the time of the Share Exchange.
CLAUSE
FIVE – INCREASE IN THE EQUITY CAPITAL OF COARI
5.1.
Increase in the Equity Capital of Coari
. The Share Exchange will result in
an increase in the equity capital of Coari in the amount of R$20,468,201,465.96 (twenty billion, four hundred sixty-eight million, two hundred one thousand, four hundred sixty-five
reais
and ninety-five
centavos
) through the transfer
of the shares of TMAR to Coari as set forth in the Equity Appraisal Report on TMAR Shares and in compliance with
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Article 252 of the Brazilian Corporation Law. Coari will issue 153,841,521 (one hundred fifty-three million, eight hundred forty-one thousand, five hundred twenty-two) registered common shares
and 189,789,368 (one hundred eighty-nine million, seven hundred eighty-nine thousand, three hundred sixty-eight) registered preferred shares, without par value, which will be distributed to the current shareholders of TMAR, in exchange for their
TMAR shares.
5.2.
Composition of the Equity Capital of Coari After the Share Exchange
. As a result of the above-mentioned capital
increase, the equity capital of Coari will increase to R$21,898,692,753.92 (twenty-one billion, eight hundred ninety-eight million, six hundred ninety-two thousand, seven hundred fifty-three
reais
and ninety-two
centavos
), which also
reflects the capital increase resulting from the Split-Off described in Section I of this Protocol and Justification. After the Split-Off and the Share Exchange, the equity capital of Coari will be represented by 154,032,213 (one hundred fifty-four
million, thirty-two thousand, two hundred thirteen) registered common shares and 190,024,620 (one hundred ninety million, twenty-four thousand, six hundred twenty) registered preferred shares, without par value. As described above in item 2.3 of
this Section II, fractional shares issued by Coari and distributed to individual TMAR shareholders in connection with the Split-Off will be consolidated with the fractions of shares fractional shares of Coari issued in connection with the Share
Exchange, so that each shareholder will hold, after the Split-Off and the Share Exchange, the same number of shares of Coari which they held of TMAR prior to the Split-Off and the Share Exchange.
5.3.
Wholly-Owned Subsidiary
. As a result of the Share Exchange, TMAR shall become a wholly-owned subsidiary of Coari.
CLAUSE SIX – AMENDMENT OF THE CORPORATE BY-LAWS OF COARI
6.1.
Amendment of Coari’s Corporate By-Laws
. As the Spin-Off and the Share Exchange, provided for in this Protocol and Justification, will be considered and approved at the same extraordinary
shareholders’ meeting of Coari, which will be timely called, in connection with both the Spin-Off and the Share Exchange, the corporate by-laws of Coari must be amended in order to reflect the change in the amount of its share capital and the
number of shares into which its share capital is divided. After these transactions are approved, the following proposed amendment to the main section of Article 5 of the corporate by-laws of Coari will be submitted to its shareholders:
“
Article 5
- The Equity Capital is R$21,898,692,753.92 (twenty one billion, eight hundred ninety-eight million, six hundred
ninety-two thousand, seven hundred fifty-three
reais
and ninety-two
centavos
), divided into 344,056,833 (three hundred forty-four million, fifty-six thousand, eight hundred thirty-three) shares, consisting of 154,032,213 (one hundred
fifty-four million, thirty-two thousand, two hundred thirteen) common shares and 190,024,620 (one hundred ninety million, twenty-four thousand, six hundred twenty) preferred shares, all registered and with no par value.”
CLAUSE SEVEN – REASONS FOR SHARE EXCHANGE
9
7.1.
Reasons for the Share Exchange
. The Share Exchange is one of the steps of the Corporate
Reorganization and the managements of the Oi Companies believe that the Share Exchange is an essential step of the Corporate Reorganization and that the Share Exchange furthers the best interests of TMAR, Coari and their shareholders, particularly
through:
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(i)
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simplifying the corporate structure, which is currently extremely complex and includes three publicly-held companies with seven different classes of publicly traded
shares, and governance of the Oi Companies by consolidating the shareholder bases of the Oi Companies in one public company with two classes of shares that will be traded in Brazil and abroad;
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(ii)
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reduce operational, administrative and financial costs following the consolidation of the general management of the Oi Companies, the simplification of their capital
structure, and the improvement of their ability to attract investments and access the capital markets;
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(iii)
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enabling the merger of Coari into BRT and transforming TMAR into a wholly-owned subsidiary of BRT, which is the only Oi Company which currently has both common and
preferred shares listed in Brazil and New York (through its ADR programs);
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(iv)
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aligning the interests of the shareholders of TMAR, Coari and BRT; and
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(v)
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eliminating the costs of separate listings of the shares of TMAR and Coari, as well as costs arising from separately complying with the public disclosure requirements
applicable to TMAR and Coari.
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CLAUSE EIGHT – ALLOCATION OF THE VALUE OF THE TMAR SHARES
8.1.
Value of the TMAR shares
. According to the Equity Appraisal Report on TMAR Shares, the book value on the Base Date of the TMAR shares to be
transferred to Coari is R$59.4907 (fifty-nine
reais
forty-nine
centavos
and fraction) per share, and 343,630,889 (three hundred forty-three million, six hundred thirty thousand, eight hundred eighty-nine) TMAR shares will be
transferred to Coari, resulting in an amount equal to R$20,468,201,465.96 (twenty billion, four hundred sixty-eight million, two hundred one thousand, four hundred sixty-five
reais
and ninety-five
centavos
) that will be allocated in
full to the increase in the equity capital of Coari.
CLAUSE NINE – TYPES OF SHARES ISSUED TO THE TMAR SHAREHOLDERS
9.1.
Shares to be Issued to the TMAR Shareholders in the Share Exchange
. The holders of common shares of TMAR will receive the same number of
common shares issued by Coari and the holders of TMAR Class A or Class B preferred shares will receive the same number of preferred shares issued by Coari as the number of common or preferred shares of TMAR that they held, which will be
extinguished as a result of the Share Exchange. The common and preferred shares issued by Coari to TMAR shareholders will entitle them to the same rights as those conferred by the other common and preferred shares issued by Coari, respectively.
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CLAUSE TEN – WITHDRAWAL RIGHTS
10.1.
Withdrawal Rights of TMAR and Coari Shareholders
. Pursuant to the provisions set forth in Article 137 of the Brazilian Corporation Law, shareholders that do not approve the Share Exchange,
through dissent, abstention or not attending the General Meetings of TMAR and Coari called to consider the Share Exchange, are entitled to withdrawal rights, unless the shares owned by such shareholders possess liquidity and dispersal in the market,
under the terms of Article 137, II of the Brazilian Corporation Law, which is not the case for the shares of TMAR and Coari. In order for the exercise the withdrawal rights to be effective, the shareholders of TMAR and Coari must exercise their
withdrawal rights with respect to the totality of the shares owned by them at the time of the general shareholders’ meeting of TMAR and Coari that approves the Share Exchange.
10.1.1. Shareholders owning TMAR common shares and Class A or Class B preferred shares will have withdrawal rights.
10.1.2. Shareholders owning common and preferred shares of Coari will have withdrawal rights.
10.1.3. A shareholder of either Coari or TMAR must specifically express its intention to exercise its withdrawal rights within thirty
(30) days after the publication date of the minutes of the General Shareholder’s Meeting of TMAR at which the Share Exchange is approved.
10.2.
Value of Reimbursement to TMAR Shareholders
. Pursuant to the provisions set forth in Article 12 of the corporate by-laws of TMAR, the shareholders of TMAR that dissent at the general
shareholder’s meeting of TMAR which will consider the Share Exchange will have the right to be reimbursed for their TMAR shares at the economic value of their TMAR shares as determined based on an independent Economic Appraisal Report on TMAR
prepared as of the Base Date. Pursuant to Article 45, §§ 3 and 4 of the Brazilian Corporation Law, a general shareholders’ meeting of TMAR will be called in due course to choose the specialized company that will prepare the
abovementioned report, among a list of three companies recommended by the Board of Directors of TMAR. The reimbursement value per share to be paid in connection with the exercise of the withdrawal rights will be fully disclosed before the general
shareholders’ meeting of TMAR which will consider the Share Exchange.
10.3.
Value of Reimbursement to TMAR Shareholders in accordance
with the Net Worth Appraisal Report at Market Prices.
Given that the Exchange Ratio proposed to the non-controlling shareholders of TMAR for the Share Exchange is more favorable then the one resulting from the comparison of the net worth of TMAR
and Coari at market prices provided in the Net Worth Appraisal Report at Market Prices, the dissenting shareholders at the extraordinary general shareholders’ meeting of TMAR called to consider the Share Exchange will not be able to elect to
receive a reimbursement value calculated based on the net worth at market prices in exchange for their withdrawn shares.
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10.4.
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Payment of Reimbursement
. The payment of the reimbursement value for the
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withdrawn shares will depend on the effective completion of the Share Exchange, as set forth in Article 230 of the Brazilian Corporation Law. In accordance with Article 137 of the Brazilian
Corporation Law, the reimbursement of the value of the withdrawn shares will be assured only in respect of shares for which the shareholder was proven to be the owner at the close of trading on May 24, 2011, the date of publication of the
Statement of Material Fact announcing the Corporate Reorganization and the Share Exchange and which have been owned by the shareholder uninterruptedly through the effective exercise of the right of withdrawal.
10.5.
Rescission of the Share Exchange
. Pursuant to Article 137, §3 of the Brazilian Corporation Law, in the event that the amount to be paid
to shareholders of TMAR or Coari in connection with the exercise of withdrawal rights would, in the opinion of the management of TMAR or Coari, jeopardize the financial stability of the respective companies, the Share Exchange may be rescinded
through a proposal presented by the management of TMAR or Coari.
CLAUSE ELEVEN – APPROVAL BY THE GENERAL SHAREHOLDERS’ MEETINGS
OF TMAR AND COARI
11.1.
General Meetings of the Shareholders
. The Share Exchange will be considered by the same general
shareholders’ meetings of TMAR and Coari that will be held to consider the Split-Off.
SECTION III
GENERAL PROVISIONS
12.1.
Rights and Obligations
. TMAR will be jointly liable with Coari for all of the obligations related to the Split-Off Portion assumed by Coari as a result of the Split-Off.
12.2.
Absence of Succession on the Share Exchange
. Upon the effective completion of the Share Exchange, Coari will not absorb the assets, rights, goods, obligations and liabilities of TMAR, and
TMAR will maintain its legal existence, becoming a wholly-owned subsidiary of Coari, without succession.
12.3.
Auditing the Financial
Statements of TMAR and Coari
. In compliance with Article 12 of CVM Instruction No. 319/99, the financial statements of TMAR and Coari dated as of June 30, 2011 that served as the basis for the Split-Off and the Share Exchange were
audited by Deloitte Touche Tohmatsu.
12.4.
Independent Special Committees
. Given that the merger of Coari into BRT and the merger of
TNL into BRT are transactions between controlling shareholders and their subsidiaries, the managements of TNL, TMAR and BRT have constituted independent special committees, pursuant to and for the purposes of CVM Guideline No. 35. Coari did not
constitute its own independent special committee since TMAR is its only shareholder and considering that the exchange ratio to be applied in the Split-Off and Share Exchange is of one common share of Coari for each common share of TMAR and one
preferred share of Coari for each class A or class B preferred share of TMAR. Given that following the Split-Off and the Share Exchange, Coari will have the same shareholding structure as TMAR does currently (except for the shares held in treasury,
which will be cancelled), the exchange ratios negotiated by the independent special
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committees of TMAR and BRT have considered the Split-Off and Share Exchange in order to negotiate the exchange ratios to be recommended to the Board of Directors of TMAR and BRT.
12.5.
Documents Available to the Shareholders
. All the documents mentioned in this Protocol and Justification, as well as all
the other documents already available at this moment, will be available to the respective TMAR and Coari shareholders as required by applicable law and regulations, and may be reviewed by such shareholders at the following address: Rua Humberto de
Campos 425, 5
th
floor (part), Leblon, City of Rio de
Janeiro, State of Rio de Janeiro. These documents will also be available at the following websites: CVM (www.cvm.gov.br), BM&FBOVESPA (www.bmfbovespa.com.br), and the TMAR Investor Relations website (www.oi.net.br/ri).
12.6.
Notification of the Split-Off and the Share Exchange to the Authorities
. The Split-Off and the Share Exchange are being analyzed by ANATEL.
Any other necessary communications related to the Split-Off and the Share Exchange will be submitted to the relevant government authorities in compliance with the governing law.
12.7.
Registration with the SEC and Release of the Information Required by CVM Instructions No. 139/99 and No. 481/09
. Although we are relying on an exemption from the registration
requirements under the U.S. Securities Act of 1933, as amended, in connection with the Split-Off and the Share Exchange, we will file a registration statement with the SEC in connection with the merger of TNL into BRT. As a result, the general
shareholders’ meetings that will consider the Split-Off and the Share Exchange will only be called after such registration statement has been declared effective by the SEC. At this moment, without adverse effects to the partial disclosure of
some data and information related to the Corporate Reorganization, the materials set forth in CVM Instruction No. 481/09 and CVM Instruction No. 319/99, including the Material Fact provided for in CVM Instruction No. 319/99, will also
be fully disclosed.
12.8.
Approval of the Corporate Reorganization
. The Corporate Reorganization assumes the share exchange between
TMAR and Coari and the mergers of both Coari and TNL into BRT will occur on the same date, together and inseparable one from the others, and as a result, the completion of each of these transactions, including the Split-Off and Share Exchange, will
be conditioned on the approval of the other transactions.
12.9.
Survival of Valid Clauses
. Should any clause, provision, term or
condition of this Protocol and Justification be deemed invalid, the other clauses, provisions, terms and conditions will not be adversely affected by such invalidation.
12.10.
Election of Courts of Law
. The Central Law Court of the Rio de Janeiro State Court District is hereby elected to settle all issues arising from this Protocol and Justification, waiving any
other, no matter how much more privileged it may be.
(rest of the page intentionally left blank)
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BEING IN FULL AND FAIR AGREEMENT, the Parties sign this Protocol and Justification in 3 (three) copies of
identical form and content for one single purpose, together with the two undersigned witnesses.
Rio de Janeiro, August 26,
2011.
TELEMAR NORTE LESTE S.A.
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/s/ Francisco Tosta Valim Filho
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/s/ Maxim Medvedovsky
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Name: Francisco Tosta Valim Filho
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Name: Maxim Medvedovsky
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Position: Chief Executive Officer
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Position: Officer
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COARI PARTICIPAÇÕES S.A.
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/s/ Francisco Tosta Valim Filho
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/s/ Maxim Medvedovsky
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Name: Francisco Tosta Valim Filho
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Name: Maxim Medvedovsky
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Position: Chief Executive Officer
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Position: Officer
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Witnesses
:
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/s/ Carolina Ohana Marques de Cunha
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/s/ Andrea Gerlach Lima de Alencar
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Name: Carolina Ohana Marques de Cunha
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Name: Andrea Gerlach Lima de Alencar
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Identity Card No:
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Identity Card No:
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Exhibit 1.1. of Section I
Specifications of the Assets/Liabilities of the Split-Off Portion
Specifications of the Assets/Liabilities of the Split-Off Portion
Assets
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Investment in Coari
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16,382,514,682.93
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Liabilities
BOND
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Outstanding balance
|
|
|
|
|
2,818,280,659.76
|
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
|
|
(295,242,773.83
|
)
|
|
|
|
|
|
Total balance of related hedges
|
|
|
|
|
553,560,913.34
|
|
|
|
|
|
|
Total indebtedness
|
|
|
|
|
3,076,598,799.27
|
|
|
|
|
|
|
List of related hedging contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Treasury
|
|
Counterparty
|
|
Fair Value
|
|
|
50000000096
|
|
073/2009
|
|
Morgan Stanley
|
|
|
29,385,118.88
|
|
|
50000000098
|
|
080/2009
|
|
Merrill Lynch
|
|
|
19,684,119.03
|
|
|
50000000099
|
|
081/2009
|
|
JP Morgan
|
|
|
11,318,737.75
|
|
|
50000000100
|
|
083/2009
|
|
Merrill Lynch
|
|
|
21,810,749.07
|
|
|
50000000103
|
|
198/2009
|
|
Morgan Stanley
|
|
|
36,925,528.23
|
|
|
50000000109
|
|
086/2009
|
|
JP Morgan
|
|
|
21,504,961.25
|
|
|
50000000110
|
|
087/2009
|
|
JP Morgan
|
|
|
14,336,640.81
|
|
|
50000000112
|
|
102/2009
|
|
Santander
|
|
|
25,918,754.71
|
|
|
50000000114
|
|
020/2010
|
|
Deutsche Bank
|
|
|
13,758,745.76
|
|
|
50000000115
|
|
021/2010
|
|
Standard
|
|
|
23,620,913.91
|
|
|
50000000118
|
|
024/2010
|
|
Deutsche Bank
|
|
|
19,712,839.48
|
|
|
50000000184
|
|
FWD137
|
|
HSBC
|
|
|
24,056,463.50
|
|
|
50000000186
|
|
FWD135
|
|
Deutsche Bank
|
|
|
24,135,261.07
|
|
|
50000000187
|
|
FWD139
|
|
BNP Paribas
|
|
|
24,371,653.79
|
|
|
50000000190
|
|
FWD136
|
|
Itaú BBA
|
|
|
48,191,724.60
|
|
|
50000000191
|
|
FWD141
|
|
Itaú BBA
|
|
|
24,233,758.04
|
|
|
50000000192
|
|
FWD145
|
|
Itaú BBA
|
|
|
24,125,411.38
|
|
|
50000000194
|
|
FWD140
|
|
Bradesco
|
|
|
24,371,653.79
|
|
|
50000000197
|
|
FWD143
|
|
Santander
|
|
|
22,384,954.36
|
|
|
50000000198
|
|
FWD138
|
|
Morgan Stanley
|
|
|
24,361,804.09
|
|
|
50000000205
|
|
FWD151
|
|
Merrill Lynch
|
|
|
8,562,505.85
|
|
|
50000000214
|
|
FWD153
|
|
HSBC
|
|
|
11,242,542.76
|
|
|
50000000218
|
|
FWD157
|
|
Merrill Lynch
|
|
|
5,620,291.42
|
|
|
50000000220
|
|
FWD155
|
|
Santander
|
|
|
5,494,057.79
|
|
|
50000000223
|
|
FWD159
|
|
Morgan Stanley
|
|
|
7,326,872.89
|
|
|
50000000225
|
|
FWD164
|
|
Santander
|
|
|
10,260,873.19
|
|
|
50000000227
|
|
FWD162
|
|
Citibank
|
|
|
3,426,748.40
|
|
|
50000000229
|
|
FWD166
|
|
Itaú BBA
|
|
|
5,678,553.08
|
|
|
50000000232
|
|
FWD170
|
|
Santander
|
|
|
5,382,389.58
|
|
|
50000000234
|
|
FWD168
|
|
Goldman & Sachs
|
|
|
5,309,562.49
|
|
|
50000000236
|
|
FWD172
|
|
Goldman & Sachs
|
|
|
7,046,722.39
|
|
|
50000000204
|
|
002/2011
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000209
|
|
001/2011
|
|
Morgan Stanley
|
|
|
—
|
|
|
50000000211
|
|
003/2011
|
|
Morgan Stanley
|
|
|
—
|
|
|
50000000210
|
|
004/2011
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000212
|
|
007/2011
|
|
Goldman & Sachs
|
|
|
—
|
|
Liabilities (cont.)
|
|
|
|
|
|
|
|
|
|
|
BOND 750 M
|
|
|
|
|
|
Outstanding balance
|
|
|
1,747,218,402.34
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
(23,566,979.55
|
)
|
|
|
|
|
Total balance of related hedges
|
|
|
24,579,375.75
|
|
|
|
|
|
Total indebtedness
|
|
|
1,748,230,798.54
|
|
|
List of related hedging contracts
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Treasury
|
|
Counterparty
|
|
Fair Value
|
|
|
|
|
FWD181
|
|
HSBC
|
|
|
—
|
|
|
|
|
FWD182
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000221
|
|
FWD160
|
|
Deutsche Bank
|
|
|
24,579,375.75
|
|
|
50000000237
|
|
FWD173
|
|
Deutsche Bank
|
|
|
—
|
|
|
50000000238
|
|
FWD174
|
|
BNP Paribas
|
|
|
—
|
|
|
50000000239
|
|
FWD175
|
|
HSBC
|
|
|
—
|
|
|
50000000240
|
|
FWD176
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000241
|
|
FWD177
|
|
HSBC
|
|
|
—
|
|
|
50000000242
|
|
FWD178
|
|
HSBC
|
|
|
—
|
|
|
50000000243
|
|
FWD179
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000244
|
|
FWD180
|
|
Merrill Lynch
|
|
|
—
|
|
|
|
|
BOND – Citibank
|
|
|
|
|
|
Outstanding balance
|
|
|
226,247,840.06
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
(19,803,067.42
|
)
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
206,444,772.64
|
|
|
|
|
|
DEBENTURE 7 YEARS CDI + 0.55%
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
560,979,560.54
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
560,979,560.54
|
|
|
List of related hedging contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Treasury
|
|
Counterparty
|
|
Fair Value
|
|
|
50000000068
|
|
001/2007
|
|
Citibank
|
|
|
—
|
|
|
|
|
|
PUBLIC DEBENTURE 2010 5
TH
ISSUANCE – 1
ST
SERIES
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
1,798,777,554.99
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
(8,345,267.02
|
)
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
1,790,432,287.97
|
|
17
Liabilities (cont.)
|
|
|
|
|
|
|
PUBLIC DEBENTURE 2010 5
TH
ISSUANCE – 2
ND
SERIES
|
|
|
|
|
|
Outstanding balance
|
|
|
269,424,445.82
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
(1,397,991.59
|
)
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
268,026,454.23
|
|
|
|
|
|
BNDES Direct TJLP05 7 IP
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
9,483,526.73
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
9,483,526.73
|
|
|
|
|
|
BNDES Direct TJLP05 Tranche A
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
20,700,839.87
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
20,700,839.87
|
|
|
|
|
|
BNDES Direct TJLP05 Tranche B
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
5,177,170.72
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
5,177,170.72
|
|
|
|
|
|
BNDES Direct TJLP05 Tranche C
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
808,000.69
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
808,000.69
|
|
|
|
|
|
BNDES Direct TJLP06 Tranche A (1)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
866,900,682.52
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
866,900,682.52
|
|
|
|
|
|
BNDES Direct TJLP06 Tranche A (2)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
281,640,651.26
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
281,640,651.26
|
|
18
Liabilities (cont.)
|
|
|
|
|
|
|
BNDES Direct TJLP06 Tranche B
|
|
|
|
|
|
Outstanding balance
|
|
|
48,548,836.84
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
48,548,836.84
|
|
|
|
|
|
BNDES Direct TJLP OI
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
128,299,255.09
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
128,299,255.09
|
|
|
|
|
|
PRIVATE DEBENTURE (CREDITOR: OI)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
4,001,070,650.34
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
4,001,070,650.34
|
|
|
|
|
|
PRIVATE DEBENTURE (CREDITOR: BRT CELULAR)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
2,055,843,794.61
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
2,055,843,794.61
|
|
|
|
|
|
PRIVATE DEBENTURE (CREDITOR: COPART 4)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
1,016,994,273.20
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
1,016,994,273.20
|
|
|
|
|
|
Totals
|
|
|
|
|
|
Outstanding balance
|
|
|
15,856,396,145.38
|
|
|
Transaction costs to appropriate
|
|
|
(348,356,079.41
|
)
|
|
Total balance of related hedges
|
|
|
578,140,289.09
|
|
|
|
|
|
Total indebtedness
|
|
|
16,086,180,355.06
|
|
19
Exhibit 3.1. of Section I
Appraisal Report on the Split-Off Portion
|
|
|
|
|
REPORT:
|
|
RJ-0375/11-01
|
|
|
|
|
BASE DATE:
|
|
June 30, 2011
|
|
|
|
|
REQUESTING PARTY:
|
|
COARI PARTICIPAÇÕES S.A.,
with its head office located at Rua Humberto de Campos, nº 425, 8º andar (parte), in Leblon, in the city and state of Rio
de Janeiro, registered with the General Roster of Corporate Taxpayers (CNPJ) under Nº. 04.030.087/0001-09, hereinafter referred to as
COARI.
|
|
|
|
|
OBJECT:
|
|
TELEMAR NORTE LESTE S.A.
, with its head office located at General Polidoro nº99, in Botafogo, in the City and State of Rio De Janeiro, registered with the General
Roster of Corporate Taxpayers (CNPJ) under Nº. 33.000.118/0001-79, hereinafter referred to as
TMAR
.
|
|
|
|
|
PURPOSE:
|
|
To assess the book value of TMAR’s shares in connection with the split-off with COARI, pursuant to Law No. 6,404, of Dec/15/1976 (Corporate Law).
|
TABLE OF CONTENTS
1.
INTRODUCTION
APSIS CONSULTORIA EMPRESARIAL Ltda., hereinafter referred to as APSIS, with its head office located at Rua da
Assembléia, Nº. 35, 12th floor, in the City and State of Rio de Janeiro, registered with the General Roster of Corporate Taxpayers (CNPJ) under No 08.681.365/0001-30, was appointed to assess the book value of TMAR shares in connection
with the split-off with COARI, pursuant to Law No. 6,404 of 12/15/1976 (Corporate Law).
In preparing this report, we used data and
information provided by third parties, in the form of documents and verbal interviews with the client. Estimates used in this process are based on documents and information which include, among others, the following:
|
|
•
|
|
Balance Sheet of TMAR as of June 30, 2011.
|
APSIS has recently performed appraisals for publicly-held companies, for various purposes, of the following companies:
|
|
•
|
|
AMÉRICA LATINA LOGÍSTICA DO BRASIL S/A
|
|
|
•
|
|
ESTA-EMPRESA SANEADORA TERRITORIAL AGRÍCOLA S/A.
|
|
|
•
|
|
GEODEX COMMUNICATIONS DO BRASIL S/A
|
|
|
•
|
|
L.R. CIA.BRAS.PRODS.HIGIENE E TOUCADOR S/A
|
|
|
•
|
|
LIGHT SERVIÇOS DE ELETRICIDADE S/A
|
|
|
•
|
|
TAM TRANSPORTES AÉREOS MERIDIONAL S/A
|
The
APSIS team in charge of preparing this report comprises the following professionals:
Project manager
|
|
•
|
|
ANA CRISTINA FRANÇA DE SOUZA
|
Civil engineer
Post-graduate in Accounting Sciences (CREA/RJ
91.1.03043-4)
Project manager
|
|
•
|
|
CESAR DE FREITAS SILVESTRE
|
Accountant (CRC/RJ 44779/O-3)
Accountant (CRC/RJ 022016-O-9)
|
|
•
|
|
LUIZ PAULO CESAR SILVEIRA
|
Mechanical engineer
Master of Business Management (CREA/RJ
89.1.00165-1)
|
|
•
|
|
MARGARETH GUIZAN DA SILVA OLIVEIRA
|
Civil engineer (CREA/RJ 91.1.03035-3)
|
|
•
|
|
RICARDO DUARTE CARNEIRO MONTEIRO
|
Civil engineer
Post-graduate in Economic Engineeering (CREA/RJ
30137-D)
|
|
•
|
|
SÉRGIO FREITAS DE SOUZA
|
Economist (CORECON/RJ 23521-0)
|
|
•
|
|
WASHINGTON FERREIRA BRAGA
|
Accountant (CRC/RJ 024.100-6 / CVM 6734)
2. PRINCIPLES
AND QUALIFICATIONS
This report strictly complies with the fundamental principles described below:
|
|
•
|
|
The consultants and appraisers do not have any direct or indirect interest in the companies involved in the share exchange, nor are there any other
circumstances which may characterize a conflict of interest.
|
|
|
•
|
|
To the best of the consultants’ knowledge and belief, the analyses, opinions and conclusions expressed in this Report are based on data,
diligence, research and surveys that are true and correct.
|
|
|
•
|
|
This Report presents all the limiting conditions imposed by the adopted methodologies, which affect the analyses, opinions and conclusions contained
therein.
|
|
|
•
|
|
APSIS professional fees are not in any way whatsoever subject to the conclusions of this report.
|
|
|
•
|
|
APSIS assumes full responsibility for the matter of Appraisal Engineering, including implicit appraisals, and for the exercise of its honorable duties,
primarily established in the appropriate laws, codes or regulations.
|
|
|
•
|
|
In this Report, it is assumed that the information received from third parties is correct, and the sources thereof are contained in this Report.
|
|
|
•
|
|
This Report was prepared by APSIS and no one other than the consultants themselves prepared the analyses and respective conclusions.
|
|
|
•
|
|
For projection purposes, we start with the premise of the inexistence of liens or encumbrances of any nature, whether judicial or extrajudicial,
affecting the companies in question, other than those listed in this Report.
|
|
|
•
|
|
This Report complies with the specifications and criteria prescribed by USPAP (Uniform Standards of Professional Appraisal Practice), in addition to
the requirements imposed by different bodies and regulations, where applicable, such as: Finance Ministry, the Central Bank of Brazil, Banco do Brasil, CVM (Brazilian Securities and Exchange Commission), SUSEP (Superintendence of Private Insurance),
RIR (Income Tax Regulations), etc.
|
|
|
•
|
|
The managers of the companies involved did not direct, restrict, hinder or take any actions which have or may have compromised access to, use or
knowledge of information, assets, documents, or work methods applicable to the quality of the respective conclusions contained herein.
|
3.
RESPONSIBILITY LIMITS
|
|
•
|
|
To prepare this report, APSIS used historic data and information, audited by third parties or unaudited, and unaudited projected data provided in
writing or verbally by the company’s management or obtained from the sources mentioned. Therefore, APSIS has assumed as true the data and information obtained for this report and does not have any responsibility in connection with its
truthfulness.
|
|
|
•
|
|
The scope of this work did not include an audit of the financial statements or a revision of the work performed by the company’s auditors.
|
|
|
•
|
|
Our work was developed for use by the requesting party in connection with the previously described objectives.
|
|
|
•
|
|
We do not take responsibility for occasional losses to the requesting party or to other parties as a result of the use of data and information provided
by the company and contained herein.
|
4. APPRAISAL
METHODOLOGY
Analysis of the previously mentioned supporting documents designed to ascertain whether bookkeeping was accurately conducted
and was in compliance with the legal, regulatory, normative, statutory and contractual provisions which govern the matter, within the scope of “Generally Accepted Accounting Principles and Conventions”.
We examined the balance sheet of TMAR, as well as all other documents required for the preparation of this report, which was prepared on the basis of
TMAR balance sheet for the period ending June 30, 2011.
It was ascertained that the assets and liabilities of TMAR have been duly
accounted for.
5. NET EQUITY
APPRAISAL
We examined the accounting books of TMAR, as well as all other documents required for the preparation of this report.
The experts have ascertained that the book net equity value of TMAR, in connection with the split-off with COARI is equivalent to R$
296,334,327.87 (two hundred ninety six million, three hundred thirty four thousand, three hundred twenty seven reais and eighty seven centavos), as of June 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
TELEMAR NORTE LESTE S.A.
|
|
ACCOUNTING STATEMENT
|
|
|
BALANCE SHEET - (THOUSANDS REAIS)
|
|
Balance as of
6/30/2011
|
|
|
NET BOOK EQUITY
VALUE
|
|
|
CURRENT ASSETS
|
|
|
9,261,054,948.34
|
|
|
|
0.00
|
|
|
LONG TERM ASSETS
|
|
|
5,963,203,027.99
|
|
|
|
0.00
|
|
|
PERMANENT
|
|
|
36,559,928,978.93
|
|
|
|
-16,382,514,682.93
|
|
|
INVESTMENTS
|
|
|
27,378,876,019.88
|
|
|
|
-16,382,514,682.93
|
|
|
- Coari Participações S.A.
|
|
|
16,382,514,682.93
|
|
|
|
-16,382,514,682.93
|
|
|
- Investments in Other Subsidiaries
|
|
|
10,954,757,270.62
|
|
|
|
0.00
|
|
|
- Other Investments
|
|
|
41,604,066.33
|
|
|
|
0.00
|
|
|
FIXED ASSETS
|
|
|
8,826,996,905.54
|
|
|
|
0.00
|
|
|
INTANGIBLE ASSETS
|
|
|
354,056,053.51
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
51,784,186,955.26
|
|
|
|
-16,382,514,682.93
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
5,277,565,694.78
|
|
|
|
-1,074,598,034.67
|
|
|
Loans and Financing
|
|
|
2,376,831,688.31
|
|
|
|
-1,074,598,034.67
|
|
|
Other Current Liabilities
|
|
|
2,900,734,006.47
|
|
|
|
0.00
|
|
|
LONG TERM LIABILITIES
|
|
|
25,733,163,061.64
|
|
|
|
-15,011,582,320.39
|
|
|
Loans and Financing
|
|
|
22,231,368,413.39
|
|
|
|
-15,011,582,320.39
|
|
|
Other Non-Current Liabilities
|
|
|
3,501,794,648.25
|
|
|
|
0.00
|
|
|
EQUITY
|
|
|
20,773,458,198.84
|
|
|
|
-296,334,327.87
|
|
|
Capital
|
|
|
11,624,809,217.95
|
|
|
|
0.00
|
|
|
Capital Reserves Available
|
|
|
3,086,540,194.43
|
|
|
|
-1,253,206,543.28
|
|
|
Non-available Capital Reserves
|
|
|
758,546,168.74
|
|
|
|
-28,657,208.84
|
|
|
Distributable Profit Reserves
|
|
|
6,177,475,630.88
|
|
|
|
0.00
|
|
|
Non-Distributable Profit Reserves
|
|
|
95,011,245.46
|
|
|
|
0.00
|
|
|
Preferred Stocks in Treasury
|
|
|
-28,657,208.84
|
|
|
|
28,657,208.84
|
|
|
Equity Valuation Adjustments
|
|
|
-1,281,659,496.69
|
|
|
|
956,872,215.41
|
|
|
Net Income
|
|
|
341,392,446.91
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
51,784,186,955.26
|
|
|
|
-16,382,514,682.93
|
|
|
|
|
|
|
|
|
|
|
|
|
- Net Book Equity Value for COARI
|
|
|
|
|
|
R$
|
296,334,327.87
|
|
|
- COARI shares held by TNL cancelled in the split-off
|
|
|
|
|
|
-R$
|
16,382,514,682.93
|
|
|
|
|
|
|
|
|
|
|
|
|
- Reduction of Capital in COARI
|
|
|
|
|
|
-R$
|
16,086,180,355.06
|
|
|
|
|
|
|
|
|
|
|
|
6. CONCLUSION
Considering the verifications performed on the previously mentioned documents and based on APSIS’ analyses, the experts have
concluded that the book net equity value of
TMAR,
in connection with the split-off with
COARI
is equivalent to
R$ 296,334,327.87
(two hundred ninety six million, three hundred thirty four thousand, three hundred twenty seven
reais and eighty seven centavos). Considering that the net assets split-off by TMAR will be represented by shares of stock of COARI owned by TMAR; therefore, the net assets to be absorbed by COARI will result in a reduction of COARI’s capital
of
R$ 16,086,180,355.06
(sixteen billion, eighty six million, one hundred eighty thousand, three hundred fifty five reais and six centavos), on June 30, 2011.
Having concluded Report
RJ-0375/11-01
, which consists of 09 (nine) pages typed on one side and 02 (two) attachments and reproduced in 03 (three) original counterparts, APSIS Consultoria Empresarial
Ltda., CRC/RJ 005112/0-9 and CORECON/RJ RF/2.052-4, a company specializing in the appraisal of assets, legally represented by the signatories below, makes itself available for any clarifications which may be necessary.
Rio de Janeiro, August 12, 2011.
|
|
|
|
|
|
|
LUIZ PAULO CESAR SILVEIRA
Director
|
|
BETINA DENGLER
Project
Manager
|
|
WASHINGTON FERREIRA BRAGA
Accountant (CRC/RJ 024.100-6 / CVM 6734)
|
7. LIST OF
ATTACHMENTS
|
|
2.
|
SPECIFICATIONS OF THE LIABILITIES OF THE SPLIT-OFF PORTION
|
|
|
3.
|
GLOSSARY AND APSIS’ PROFILE
|
|
|
|
|
|
SÃO PAULO - SP
Alameda Franca, 1467 n° 44
Jardim Paulista,
CEP: 01422-001
Tel.: + 55 11 2626.0510 Fax: + 55 11
3061-5879
|
|
RIO DE JANEIRO - RJ
Rua da Assembleia, nº 35, 12º andar
Centro, CEP: 20011-001
Tel.: + 55 21 2212.6850
Fax: + 55 21 2212.6851
|
ATTACHMENT 1
TMAR PRO-FORMA BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS OF
06/30/2011
|
|
|
TELEMAR SPLIT-OFF
|
|
|
PRO-FORMA
BALANCE
|
|
|
TELEMAR SPLIT-
OFF
|
|
|
PRO-FORMA
BALANCE
|
|
|
11 - CURRENT
|
|
|
9,416,383,900.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
9,261,054,948.34
|
|
|
|
|
|
|
|
9,261,054,948.34
|
|
|
|
|
|
|
|
9,261,054,948.34
|
|
|
|
|
|
|
|
|
|
Non-Current Assets
|
|
|
42,523,132,006.92
|
|
|
|
(16,382,514,682.93
|
)
|
|
|
26,140,617,323.99
|
|
|
|
(8,922,405.01
|
)
|
|
|
26,131,694,918.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
27,378,876,019.88
|
|
|
|
(16,382,514,682.93
|
)
|
|
|
10,996,361,336.95
|
|
|
|
|
|
|
|
|
|
|
Investments in Coari
|
|
|
16,382,514,628.93
|
|
|
|
(16,382,514,682.93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in other subsidiries
|
|
|
10,954,757,270.62
|
|
|
|
|
|
|
|
10,954,757,270.62
|
|
|
|
|
|
|
|
10,954,757,270.62
|
|
|
Other investments
|
|
|
41,604,066.33
|
|
|
|
|
|
|
|
41,604,066.33
|
|
|
|
|
|
|
|
41,604,066.33
|
|
|
Other non-current assets
|
|
|
5,963,203,027.99
|
|
|
|
|
|
|
|
5,963,203,027.99
|
|
|
|
(8,922,405.01
|
)
|
|
|
5,954,280,622.98
|
|
|
12.2.3 - PROPERTIES FOR INVESTMENTS
|
|
|
287,892,386.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.3 - FIXED ASSETS
|
|
|
8,539,104,518.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
8,226,996,905.54
|
|
|
|
|
|
|
|
8,226,996,905.54
|
|
|
|
|
|
|
|
8,226,996,905.54
|
|
|
12.4 - INTANGIBLE ASSETS
|
|
|
354,056,053.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets
|
|
|
354,056,053.51
|
|
|
|
|
|
|
|
354,056,053.51
|
|
|
|
|
|
|
|
354,056,053.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
51,784,186,955.26
|
|
|
|
(16,382,514,682.93
|
)
|
|
|
35,401,672,272.33
|
|
|
|
(8,922,405.01
|
)
|
|
|
35,392,749,867.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TMAR PRO-FORMA BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS OF
06/30/2011
|
|
|
TELEMAR SPLIT-OFF
|
|
|
PRO-FORMA
BALANCE
|
|
|
TELEMAR SPLIT-
OFF
|
|
|
PRO-FORMA
BALANCE
|
|
|
21.5 - LOANS AND FINANCING
|
|
|
1,640,125,018.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.6 - HEDGING TRANSACTIONS
|
|
|
736,706,669.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
5,277,565,694.78
|
|
|
|
(1,074,598,034.67
|
)
|
|
|
4,202,967,660.11
|
|
|
|
|
|
|
|
4,202,967,660.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing
|
|
|
2,376,831,688.31
|
|
|
|
(1,074,598,034.67
|
)
|
|
|
1,302,233,653.64
|
|
|
|
|
|
|
|
1,302,233,653.64
|
|
|
Other current liabilities
|
|
|
2,900,734,006.47
|
|
|
|
|
|
|
|
2,900,734,006.47
|
|
|
|
|
|
|
|
2,900,734,006.47
|
|
|
|
|
|
|
|
|
|
22.3 - LOANS AND FINANCING
|
|
|
21,845,604,676.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.5 - HEDGING TRANSACTIONS
|
|
|
385,763,737.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Liabilities
|
|
|
25,733,163,061.64
|
|
|
|
(15,011,582,320.39
|
)
|
|
|
10,721,580,741.25
|
|
|
|
|
|
|
|
10,721,580,741.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing
|
|
|
22,231,368,413.39
|
|
|
|
(15,011,582,320.39
|
)
|
|
|
7,219,786,093.00
|
|
|
|
|
|
|
|
7,219,786,093.00
|
|
|
Other non-current liabilities
|
|
|
3,501,794,648.25
|
|
|
|
|
|
|
|
3,501,794,648.25
|
|
|
|
|
|
|
|
3,501,794,648.25
|
|
|
23 - SHAREHOLDERS EQUITY
|
|
|
20,773,458,198.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity
|
|
|
20,773,458,198.84
|
|
|
|
(296,334,327.87
|
)
|
|
|
20,477,123,870.97
|
|
|
|
(8,922,405.01
|
)
|
|
|
20,468,201,465.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.0 - SHARE CAPITAL
|
|
|
11,624,809,217.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29110000 - COMMON SHARES
|
|
|
5,835,190,442.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29110100 - PREFERRED SHARES
|
|
|
5,796,135,351.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29110110 - SUBSCRIBED CAPITAL TO BE PAID-IN
|
|
|
(6,516,576.66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
11,624,809,217.95
|
|
|
|
|
|
|
|
11,624,809,217.95
|
|
|
|
|
|
|
|
11,624,809,217.95
|
|
|
23.1.0 - CAPITAL RESERVES
|
|
|
3,845,086,363.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210000 - GOODWILL
|
|
|
1,876,237,552.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210010 - SPECIAL GOODWILL RESERVE - MERGER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210020 - GOODWILL RESERVE -SALE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210030 - SPECIAL RESERVE - MERGER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210100 - DONATIONS - PUBLIC CORPORATIONS
|
|
|
6,058,818.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210110 - DONATIONS AND SUBSIDIES - OTHERS
|
|
|
248,076,680.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210120 - TAX INCENTIVE
|
|
|
375,816,150.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210200 - INTEREST OVER WORKS IN PROGRESS
|
|
|
1,210,302,641.86
|
|
|
|
(1,253,206,543.28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210300 - C.M. SPECIAL LAW 8200/91
|
|
|
2,189,645.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210400 - OTHER CAPITAL RESERVES
|
|
|
1,195,257.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29510000 - COMPENSATION BASED ON SHARES
|
|
|
93,239,829.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29510010 - REFLEXIVE REM. RESERVES BASED ON SHARES
|
|
|
31,969,786.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available capital reserves
|
|
|
3,086,540,194.43
|
|
|
|
(1,253,206,543.28
|
)
|
|
|
1,833,333,651.15
|
|
|
|
|
|
|
|
1,833,333,651.15
|
|
|
Non-available capital reserves
|
|
|
758,546,168.74
|
|
|
|
(28,657,208.84
|
)
|
|
|
729,888,959.90
|
|
|
|
|
|
|
|
729,888,959.90
|
|
|
23.1.2 - PROFIT RESERVES
|
|
|
6,272,486,876.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220000 - LEGAL RESERVE
|
|
|
95,011,245.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220030 - RETAINED EARNINGS RESERVE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220040 - INVESTMENT RESERVE
|
|
|
6,177,475,630.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220060 - TAX INCENTIVE RESERVE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributable profit reserves
|
|
|
6,177,475,630.88
|
|
|
|
|
|
|
|
6,177,475,630.88
|
|
|
|
|
|
|
|
6,177,475,630.88
|
|
|
Non-distributable profit reserves
|
|
|
95,011,245.46
|
|
|
|
|
|
|
|
95,011,245.46
|
|
|
|
|
|
|
|
95,011,245.46
|
|
|
23.4 - SHARES IN TREASURY
|
|
|
(28,657,208.84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29410000 - COMMON SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29420000 - PREFERRED SHARES
|
|
|
(28,657,208.84
|
)
|
|
|
28,657,208.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29499999 - INITIAL CHARGE BALANCE - EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares in treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares in treasury
|
|
|
(28,657,208.84
|
)
|
|
|
28,657,208.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.5 - EQUITY VALUATION ADJUSTMENTS
|
|
|
(1,281,659,496.69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610100 - DERIVATIVES TRANSACTIONS
|
|
|
(7,948,720.91
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610110 - GOODWILL - CAPITAL TRANSACTIONS
|
|
|
(1,750,221,948.58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610120 - ADDITIONAL PAID-IN CAPITAL
|
|
|
699,701,072.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610130 - RESERVE - HEDGE ACCOUNT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610140 - VARIATION IN INVESTMENT PARTICIPATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610150 - VARIATION IN FINANCIAL ASSETS
|
|
|
(225,892,464.96
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity valuation adjustments
|
|
|
(1,281,659,496.69
|
)
|
|
|
956,872,215.41
|
|
|
|
(324,787,281.28
|
)
|
|
|
|
|
|
|
(324,787,281.28
|
)
|
|
29310000 - ACCUMULATED GAIN (LOSS)
|
|
|
(4,654,462,388.71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29310010 - GAIN (LOSS) FOR THE PERIOD
|
|
|
4,654,647,557.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.3 - GAIN (LOSS) FOR THE PERIOD
|
|
|
341,207,278.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results for the period
|
|
|
341,392,446.91
|
|
|
|
341,392,446.91
|
|
|
|
341,392,446.91
|
|
|
|
(8,922,405.01
|
)
|
|
|
332,470,041.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity
|
|
|
51,784,186,955.26
|
|
|
|
(16,382,514,682.93
|
)
|
|
|
35,401,672,272.33
|
|
|
|
(8,922,405.01
|
)
|
|
|
35,392,749,867.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net worth to be incorporated by Coari
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,468,201,465.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATTACHMENT 2
Specifications of the Liabilities of the Split-Off Portion
|
|
|
|
|
|
|
|
|
|
|
BOND
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
|
|
2,818,280,659.76
|
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
|
|
(295,242,773.83
|
)
|
|
|
|
|
|
Total balance of related hedges
|
|
|
|
|
553,560,913.34
|
|
|
|
|
|
|
Total indebtedness
|
|
|
|
|
3,076,598,799.27
|
|
|
|
|
|
|
List of related hedging contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Treasury
|
|
Counterparty
|
|
Fair Value
|
|
|
50000000096
|
|
073/2009
|
|
Morgan Stanley
|
|
|
29,385,118.88
|
|
|
50000000098
|
|
080/2009
|
|
Merrill Lynch
|
|
|
19,684,119.03
|
|
|
50000000099
|
|
081/2009
|
|
JP Morgan
|
|
|
11,318,737.75
|
|
|
50000000100
|
|
083/2009
|
|
Merrill Lynch
|
|
|
21,810,749.07
|
|
|
50000000103
|
|
198/2009
|
|
Morgan Stanley
|
|
|
36,925,528.23
|
|
|
50000000109
|
|
086/2009
|
|
JP Morgan
|
|
|
21,504,961.25
|
|
|
50000000110
|
|
087/2009
|
|
JP Morgan
|
|
|
14,336,640.81
|
|
|
50000000112
|
|
102/2009
|
|
Santander
|
|
|
25,918,754.71
|
|
|
50000000114
|
|
020/2010
|
|
Deutsche Bank
|
|
|
13,758,745.76
|
|
|
50000000115
|
|
021/2010
|
|
Standard
|
|
|
23,620,913.91
|
|
|
50000000118
|
|
024/2010
|
|
Deutsche Bank
|
|
|
19,712,839.48
|
|
|
50000000184
|
|
FWD137
|
|
HSBC
|
|
|
24,056,463.50
|
|
|
50000000186
|
|
FWD135
|
|
Deutsche Bank
|
|
|
24,135,261.07
|
|
|
50000000187
|
|
FWD139
|
|
BNP Paribas
|
|
|
24,371,653.79
|
|
|
50000000190
|
|
FWD136
|
|
Itaú BBA
|
|
|
48,191,724.60
|
|
|
50000000191
|
|
FWD141
|
|
Itaú BBA
|
|
|
24,233,758.04
|
|
|
50000000192
|
|
FWD145
|
|
Itaú BBA
|
|
|
24,125,411.38
|
|
|
50000000194
|
|
FWD140
|
|
Bradesco
|
|
|
24,371,653.79
|
|
|
50000000197
|
|
FWD143
|
|
Santander
|
|
|
22,384,954.36
|
|
|
50000000198
|
|
FWD138
|
|
Morgan Stanley
|
|
|
24,361,804.09
|
|
|
50000000205
|
|
FWD151
|
|
Merrill Lynch
|
|
|
8,562,505.85
|
|
|
50000000214
|
|
FWD153
|
|
HSBC
|
|
|
11,242,542.76
|
|
|
50000000218
|
|
FWD157
|
|
Merrill Lynch
|
|
|
5,620,291.42
|
|
|
50000000220
|
|
FWD155
|
|
Santander
|
|
|
5,494,057.79
|
|
|
50000000223
|
|
FWD159
|
|
Morgan Stanley
|
|
|
7,326,872.89
|
|
|
50000000225
|
|
FWD164
|
|
Santander
|
|
|
10,260,873.19
|
|
|
50000000227
|
|
FWD162
|
|
Citibank
|
|
|
3,426,748.40
|
|
|
50000000229
|
|
FWD166
|
|
Itaú BBA
|
|
|
5,678,553.08
|
|
|
50000000232
|
|
FWD170
|
|
Santander
|
|
|
5,382,389.58
|
|
|
50000000234
|
|
FWD168
|
|
Goldman & Sachs
|
|
|
5,309,562.49
|
|
|
50000000236
|
|
FWD172
|
|
Goldman & Sachs
|
|
|
7,046,722.39
|
|
|
50000000204
|
|
002/2011
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000209
|
|
001/2011
|
|
Morgan Stanley
|
|
|
—
|
|
|
50000000211
|
|
003/2011
|
|
Morgan Stanley
|
|
|
—
|
|
|
50000000210
|
|
004/2011
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000212
|
|
007/2011
|
|
Goldman & Sachs
|
|
|
—
|
|
Liabilities (cont.)
|
|
|
|
|
|
|
|
|
|
|
BOND 750 M
|
|
|
|
|
|
Outstanding balance
|
|
|
1,747,218,402.34
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
(23,566,979.55
|
)
|
|
|
|
|
Total balance of related hedges
|
|
|
24,579,375.75
|
|
|
|
|
|
Total indebtedness
|
|
|
1,748,230,798.54
|
|
|
List of related hedging contracts
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Treasury
|
|
Counterparty
|
|
Fair Value
|
|
|
|
|
FWD181
|
|
HSBC
|
|
|
—
|
|
|
|
|
FWD182
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000221
|
|
FWD160
|
|
Deutsche Bank
|
|
|
24,579,375.75
|
|
|
50000000237
|
|
FWD173
|
|
Deutsche Bank
|
|
|
—
|
|
|
50000000238
|
|
FWD174
|
|
BNP Paribas
|
|
|
—
|
|
|
50000000239
|
|
FWD175
|
|
HSBC
|
|
|
—
|
|
|
50000000240
|
|
FWD176
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000241
|
|
FWD177
|
|
HSBC
|
|
|
—
|
|
|
50000000242
|
|
FWD178
|
|
HSBC
|
|
|
—
|
|
|
50000000243
|
|
FWD179
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000244
|
|
FWD180
|
|
Merrill Lynch
|
|
|
—
|
|
|
|
|
BOND – Citibank
|
|
|
|
|
|
Outstanding balance
|
|
|
226,247,840.06
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
(19,803,067.42
|
)
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
206,444,772.64
|
|
|
|
|
|
DEBENTURE 7 YEARS CDI + 0.55%
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
560,979,560.54
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
560,979,560.54
|
|
|
List of related hedging contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Treasury
|
|
Counterparty
|
|
Fair Value
|
|
|
50000000068
|
|
001/2007
|
|
Citibank
|
|
|
—
|
|
|
|
|
|
PUBLIC DEBENTURE 2010 5
TH
ISSUANCE – 1
ST
SERIES
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
1,798,777,554.99
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
(8,345,267.02
|
)
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
1,790,432,287.97
|
|
Liabilities (cont.)
|
|
|
|
|
|
|
PUBLIC DEBENTURE 2010 5
TH
ISSUANCE – 2
ND
SERIES
|
|
|
|
|
|
Outstanding balance
|
|
|
269,424,445.82
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
(1,397,991.59
|
)
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
268,026,454.23
|
|
|
|
|
|
BNDES Direct TJLP05 7 IP
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
9,483,526.73
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
9,483,526.73
|
|
|
|
|
|
BNDES Direct TJLP05 Tranche A
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
20,700,839.87
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
20,700,839.87
|
|
|
|
|
|
BNDES Direct TJLP05 Tranche B
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
5,177,170.72
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
5,177,170.72
|
|
|
|
|
|
BNDES Direct TJLP05 Tranche C
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
808,000.69
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
808,000.69
|
|
|
|
|
|
BNDES Direct TJLP06 Tranche A (1)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
866,900,682.52
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
866,900,682.52
|
|
|
|
|
|
BNDES Direct TJLP06 Tranche A (2)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
281,640,651.26
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
281,640,651.26
|
|
Liabilities (cont.)
|
|
|
|
|
|
|
BNDES Direct TJLP06 Tranche B
|
|
|
|
|
|
Outstanding balance
|
|
|
48,548,836.84
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
48,548,836.84
|
|
|
|
|
|
BNDES Direct TJLP OI
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
128,299,255.09
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
128,299,255.09
|
|
|
|
|
|
PRIVATE DEBENTURE (CREDITOR: OI)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
4,001,070,650.34
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
4,001,070,650.34
|
|
|
|
|
|
PRIVATE DEBENTURE (CREDITOR: BRT CELULAR)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
2,055,843,794.61
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
2,055,843,794.61
|
|
|
|
|
|
PRIVATE DEBENTURE (CREDITOR: COPART 4)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
1,016,994,273.20
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
1,016,994,273.20
|
|
|
|
|
|
Totals
|
|
|
|
|
|
Outstanding balance
|
|
|
15,856,396,145.38
|
|
|
Transaction costs to appropriate
|
|
|
(348,356,079.41
|
)
|
|
Total balance of related hedges
|
|
|
578,140,289.09
|
|
|
|
|
|
Total indebtedness
|
|
|
16,086,180,355.06
|
|
ATTACHMENT 3
ABL - Gross Leasable Area
ABNT - Brazilian Technical Standards Association
Allocated Codes - serial number (grades or
weights) to differentiate the quality features of properties.
Allotment - subdivision of a tract of land into lots for buildings with the
opening of new thoroughfares, or the extension, modification or expansion of existing ones.
Amortization - systematic allocation of the
depreciable value of an asset over its useful life.
Apparent Age - estimated age of a property according to its characteristics and
conservation status at the time of inspection.
Asset - a resource controlled by the entity as a result of past events from which future
economic benefits are expected for the entity.
Asset Approach - valuation of companies where all assets (including those not accounted for)
have their values adjusted to the market. Also known as market net equity.
Base Date - specific date (day, month and year) of application of
the assessment value.
Basic Infrastructure - urban rainwater drainage equipment, street lighting, sewage system, drinking water, public and
home electricity supply and access routes.
BDI - a percentage that indicates the benefits and overhead costs applied to the direct cost of
construction.
Best Use of the Property - the most economically appropriate use of a certain property according to its characteristics and
surroundings, respecting legal limitations.
Beta - a systematic risk measure of a share; price trend of a particular share to be correlated with
changes in a given index.
Book Value - the value at which an asset or liability is recognized on the balance sheet.
Building Standard - the quality of the improvements according to the specifications of design, materials, workmanship and performance effectively used in
construction.
Business Combination - union of separate entities or businesses producing financial statements of a single reporting entity.
Transaction or other event by which an acquirer obtains control of one or more businesses, regardless of the legal form of operation.
Business Risk - uncertainty of realization of expected future returns of the business resulting from factors other than financial leverage.
CAPEX (Capital Expenditure) - fixed asset investments.
Capitalization - conversion of a simple period of economic benefits into value.
CAPM (Capital
Asset Pricing Model) - model in which the capital cost for any share or lot of shares equals the risk free rate plus risk premium provided by the systematic risk of the share or lot of shares under investigation. Generally used to calculate the Cost
of Equity or the Cost of Shareholder Capital.
Capitalization Rate - any divisor used to convert economic benefits into value in a single
period.
Capital Structure - composition of a company’s invested capital, between own capital (equity) and third-party capital (debt).
Cash Flow - cash generated by an asset, group of assets or business during a given period of time. Usually the term is supplemented by a
qualification referring to the context (operating, non-operating, etc...).
Cash Flow on Invested Capital - cash flow generated by the company to be reverted to lenders (interest and
amortizations) and shareholders (dividends) after consideration of cost and operating expenses and capital investments.
Cash-Generating Unit
- smallest identifiable group of assets generating cash inflows that are largely independent on inputs generated by other assets or groups of assets.
Casualty - an event that causes financial loss.
Company - commercial or industrial entity,
service provider or investment entity holding economic activities.
Conservation Status - physical status of an asset in result of its
maintenance.
Control - power to direct the strategic policy and administrative management of a company.
Control Premium - value or percentage of the pro-rata value of a lot of controlling shares over the pro-rata value of non-controlling shares, which
reflect the control power.
Cost - the total direct and indirect costs necessary for production, maintenance or acquisition of an asset at a
particular time and situation.
Cost of Capital - Expected rate of return required by the market as an attraction to certain investment funds.
CPC - Accounting Pronouncements Committee.
Current Value - value replacement with a new value depreciated as a result of the physical state the property is in.
CVM - Securities and Exchange Commission.
Damage - damage caused to others by the occurrence of flaws, defects, accidents and crimes, among others.
Data Treatment - application of operations to express, in relative terms, the attribute differences between the market data and data of the property being assessed.
Date of Issue - closing date of the valuation report, when conclusions are conveyed to the client.
DCF (Discounted Cash Flow) - discounted cash flow.
D & A - depreciation and amortization.
Dependent Variable - variable to be explained by the
independent ones.
Depreciable Value - cost of the asset, or other amount that substitutes such cost (financial statements), less its residual
value
Depreciation - systematic allocation of the depreciable value of an asset during its useful life.
Dichotomous Variable - variable that assumes only two values.
Direct Production Cost - spending on inputs, including labor, in the production of goods.
Discount for Lack of Control - value or percentage deducted from the pro-rata value of 100% of the value of a company that reflects the absence of part
or all of the control.
Discount for Lack of Liquidity - value or percentage deducted from the pro-rata value of 100% of the value
of a company that reflects the lack of liquidity.
Discount Rate - any divisor used to convert a flow of future economic benefits into present
value.
Drivers - value drivers or key variables.
EBIT (Earnings before Interest and Taxes) - earnings before interest and taxes.
EBITDA (Earnings
before Interest, Taxes, Depreciation and Amortization) - earnings before interest, taxes, depreciation and amortization.
Economic Benefits -
benefits such as revenue, net profit, net cash flow, etc.
Efficient Use - that which is recommendable and technically possible for the
location on a reference date, among the various uses permitted by the applicable law, observing surrounding marketing trends.
Electrical
Damage Value - estimated cost of the repair or replacement of parts, when the property suffers electrical damage. Values are tabulated in percentages of the Replacement Value and have been calculated through the study of equipment manuals and the
expertise in corrective maintenance of Apsis technicians.
Enterprise - set of properties capable of producing revenue through marketing or
economic exploitation. It can be: real estate (e.g. subdivision, commercial / residential buildings), real-estate based (e.g., hotel, shopping mall, theme parks), industrial or rural.
Enterprise Value - economic value of the company.
Equity Value - economic value of the equity.
Equivalent Construction Area - constructed area on which the unit cost equivalence of corresponding construction is applied, according to
ABNT postulates.
Equivalent Depth - numerical result of the division of a lot area by its main projected front.
Expertise - technical activity performed by a professional with specific expertise to investigate and clarify facts, check the status of property,
investigate the causes that motivated a particular event, appraise assets, their costs, results or rights.
Facilities - set of materials,
systems, networks, equipment and operational support services for a single machine, production line or plant, according to the degree of aggregation.
Fair Market Value - value at which an asset could have its ownership exchanged between a potential seller and a potential buyer, when both parties have reasonable knowledge of relevant facts and neither
is under pressure to do so.
Fair Value Less Cost to Sell - value that can be obtained from the sale of an asset or cash-generating unit less
sale expenses, in a transaction between knowledgeable, willing and uninterested parties.
FCFF (Free Cash Flow to Firm) - Free cash flow to
firm, or unlevered free cash flow.
Financial Lease - that which substantially transfers all the risks and benefits related to the ownership
of the asset, which may or may not eventually be transferred. Leases that are not financial leases are classified as operating leases.
Fixed
Asset - tangible asset available for use in the production or supply of goods or services, in third-party leasing, investments, or for management purposes, expected to be used for more than one accounting period.
Flaw - anomaly that affects the performance of products and services, or makes them inadequate to the purposes intended, causing inconvenience or
material loss to the consumer.
Forced Liquidation - condition on the possibility of a compulsory sale or in a shorter period than the
average absorption by the market.
Free Float - percentage of outstanding shares on the company’s total capital.
Frontage - horizontal projection of the line dividing the property and the access road; measurement of the front of a building.
Goodwill - see Goodwill based on the expectation of future profitability (goodwill).
Homogenization - treatment of observed prices by application of mathematical transformations that express, in relative terms, the differences between market data attributes and those of the property
assessed.
Homogenized Area - useful or private area, or built with mathematical treatments for valuation purposes, according to criteria
based on the real estate market.
IAS (International Accounting Standards) - International Accounting Standards.
IASB (International Accounting Standards Board) - International Accounting Standards Board.
Ideal Fraction - percentage owned by each of the buyers (tenants) of the land and of the building’s common items.
IFRS (International Financial Reporting Standards) - International Financial Reporting Standards, a set of international accounting pronouncements published and reviewed by the IASB.
Impairment - see Losses on devaluation
Impairment Losses (impairment) - book value of the asset that exceeds, in the case of
stocks, its selling price less the cost to complete it and expense of selling it; or, in the case of other assets, their fair value less expenditure for sale.
Income Approach - valuation method for converting the present value of expected economic benefits.
Independent Variables - variables that provide a logical content to the formation of the value of the property subject to the assessment.
Indirect Production Cost - administrative and financial costs, benefits and other liens and charges necessary for the production of goods.
Influence Point - atypical point that, when removed from the sample, significantly changes the estimated parameters or the linear structure of the model.
Insurance - risk transfer guaranteed by contract whereby one party undertakes, subject to payment of premium, to indemnify another for the
occurrence of casualties covered under the policy.
Insurance Value - value at which an insurance company assumes the risks, and does not
apply to the land and foundations, except in special cases.
Intangible Asset - identifiable non-monetary asset without physical substance.
This asset is identifiable when: it is separable, i.e., capable of being separated or divided from the entity and sold, transferred, licensed, leased or exchanged, either alone or together with the related contract, asset or liability; or originates
from contractual rights or other legal rights regardless of their being transferred, separable from the entity or from other rights and obligations.
Internal Rate of Return - discount rate where the present value of future cash flow is equivalent to the cost of investment.
International Accounting Standards - standards and interpretations adopted by the IASB. They include:
International Financial Reporting Standards (IFRS) International Accounting Standards (IAS) and interpretations developed by the Interpretation Committee on International Financial Reporting Standards (IFRIC) or by the former Standing
Interpretations Committee (SIC).
Invested Capital - the sum of own capital and third-party capital invested in a company. Third-party capital
is usually related to debt with interest (short and long-term) and must be specified within the context of the valuation.
Investment Property
- property (land, building or building part, or both) held by the owner or lessee under the lease, both to receive payment of rent and for capital appreciation or both, other than for: use in the production or supply of goods or services, as well as
for administrative purposes.
Investment Value - value for a particular investor based on individual interests in the property in question. In
the case of business valuation, this value can be analyzed by different situations, such as the synergy with other companies of an investor, risk perceptions, future performance and tax planning.
Key Money - amount paid by the prospective tenant for signature or transfer of the lease contract, as compensation for the point of sale.
Key Variables - variables that, a priori, and traditionally have been important for the formation of property value.
Levered Beta - beta value reflecting the debt in capital structure.
Liability - present obligation that arises from past events, whereby it is hoped that the settlement thereof will result in the inflow of funds from the entity embodying economic benefits.
Liquidation Value - value of a property offered for sale on the market outside the normal process, i.e. one that would be established if the property
were offered for sale separately, taking into account the costs involved and the discount required for a sale in a reduced period.
Liquidity
- ability to rapidly convert certain assets into cash or into the payment of a certain debt.
Market Approach - valuation method in which
multiple comparisons derived from the sales price of similar assets are adopted.
Market Data - set of information collected on the market
related to a particular property.
Marketing Factor - the ratio between the market value of an asset and its reproduction cost less
depreciation or replacement cost, which may be higher or lower than 1 (one).
Market Research - set of activities for identification, investigation, collection, selection, processing,
analysis and interpretation of results on market data.
Maximum Insurance Value - maximum value of the property for which it is recommendable
to insure it. This criterion establishes that the property whose depreciation is greater than 50% should have its Maximum Insurance Value equivalent to twice as much as the Current Value; and the property whose depreciation is with less than 50%
should have its Maximum Insurance Value equivalent to the Replacement Value.
Multiple - market value of a company, share or invested capital,
divided by a valuation measurement of the company (EBITDA, income, customer volume, etc...).
Net Debt - cash and cash equivalents, net
position in derivatives, short-term and long-term financial debts, dividends receivable and payable, receivables and payables related to debentures, short-term and long-term deficits with pension funds, provisions, and other credits and obligations
to related parties, including subscription bonus.
Non-Operating Assets - those not directly related to the company’s operations (may or may not generate
revenue) and that can be disposed of without detriment to its business.
Null hypothesis in a regression model - hypothesis in which one or a
set of independent variables involved in the regression model are not important to explain the variation of the phenomenon in relation to a pre-established significance level.
Operating Assets - assets that are basic to the company’s operations.
Operating Lease -
that which does not substantially transfer all the risks and benefits incidental to the ownership of the asset. Leases that are not operating leases are classified as financial leases.
Parent Company - an entity that has one or more subsidiaries.
Perpetual Value - value at the end
of the projective period to be added on the cash flow.
Point of Sale - intangible asset that adds value to commercial property, due to its
location and expected commercial exploitation.
Population - total market data of the segment to be analyzed.
Premium for Expected Future Profitability (goodwill) - future economic benefits arising from assets not capable of being individually identified or
separately recognized.
Present Value - the estimated present value of discounted net cash flows in the normal course of business.
Price - the amount by which a transaction is performed involving a property, a product or the right thereto.
Private Area - useful area plus building blocks (such as walls, pillars, etc.) and elevator hallway (in
specific cases).
Property - something of value, subject to use, or that may be the object of a right, which integrates an equity.
Qualitative Variables - variables that cannot be measured or counted, only ordered or ranked, according to attributes inherent to the property (e.g.,
building standard, conservation status and quality of the soil).
Quantitative Variables - variables that can be measured or counted (e.g.,
private area, number of bedrooms and parking spaces).
Range for Real Estate Valuations - range in the vicinity of the point estimator adopted
in the valuation within which to arbitrate the value of the property provided it is justified by the existence of features that are not contemplated in the model.
Re (Cost of Equity) - return required by shareholders for the capital invested.
Real Estate -
property, consisting of land and any improvements incorporated thereto. Can be classified as urban or rural, depending on its location, use or to its highest and best use.
Recoverable Value - the highest fair value of an asset (or cash-generating unit) minus the cost of sales compared with its value in use.
Rd (Cost of Debt) - a measure of the amount paid for the capital earned from third parties, in the form of loans, financing, market funding, among others.
Reference Real Estate - market data with features comparable to the property assessed.
Regression Model - the model used to represent a specific phenomenon, based on a sample, considering the
various influencing characteristics.
Remaining Life - Property’s remaining life.
Replacement Cost - a property’s reproduction cost less depreciation with the same function and features comparable to the property assessed.
Replacement Value for New - value based on what the property would cost (usually in relation to current market prices) to be replaced with or
substituted by a new, equal or similar property.
Reproduction Cost - expense required for the exact duplication of a property, regardless of
any depreciation.
Reproduction Cost Less Depreciation - a property’s reproduction cost less depreciation, considering the state it is
in.
Residual Value - value of new or used asset projected for a date limited to that in which it becomes scrap, considering its being in
operation during the period.
Residual Value of an Asset - estimated value that the entity would obtain at present with the sale of the asset,
after deducting the estimated costs thereof, if the asset were already at the expected age and condition at the end of its useful life.
Sample - set of market data representative of a population.
Scrap Value - market value of a property’s reusable materials in disabling conditions, without their being used for production purposes.
Shareholders’ Equity at Market Prices - see Assets Approach.
Statistical Inference - part
of statistical science that allows drawing conclusions about the population from a sample.
Subsidiary - entity, including that with no legal
character, such as an association, controlled by another entity (known as the parent company).
Supporting Documentation - documentation
raised and provided by the client on which the report premises are based.
Survey - evidence of local events through insightful observations
in a property and of the factors and conditions that constitute or influence it.
Tangible Asset - physically existing asset, such as land,
building, machinery, equipment, furniture and tools.
Technical Report - detailed report or technical clarification issued by a legally
qualified
and trained professional on a specific subject.
Total Construction Area - resulting
from the sum of the real private area and the common area allocated to an independent unit, defined according to ABNT.
Urbanizable Land -
land eligible to receive urban infrastructure works aiming at its efficient use, by means of the subdivision, split or implementation of a business.
Useful Area - real private area subtracted from the area occupied by walls and other building blocks that prevent or hinder its use.
Useful Economic Life - the period in which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset by the entity.
Valuation - act or process of determining the value of an asset.
Valuation Methodology - one or more approaches used in developing evaluative calculations for the indication of the value of an asset.
Value at Risk - representative value of the share of the property one wishes to insure and that may correspond to the maximum insurable value.
Value in Use - value of a property in operating conditions in its present state, such as the useful part of an industry, including, where
relevant, the costs of design, packaging, taxes, freight and installation.
Value Plan - the graphic representation or listing of generic
square meter values of land or of the real estate on the same date.
WACC (Weighted Average Cost of Capital) - model in which capital cost is
determined by the weighted average of the market value of capital structure components (own and others).
Exhibit 3.1. of Section II
Equity Appraisal Report on TMAR Shares
|
|
|
|
|
REPORT:
|
|
RJ-0375/11-02 (English version)
|
|
|
|
|
BASE DATE:
|
|
June 30, 2011
|
|
|
|
|
REQUESTING PARTY:
|
|
COARI PARTICIPAÇÕES S.A.,
with its head office located at Rua Humberto de Campos, nº 425, 8º andar (parte), in Leblon, in the city and state of Rio
de Janeiro, registered with the General Roster of Corporate Taxpayers (CNPJ) under Nº. 04.030.087/0001-09, hereinafter referred to as
COARI.
|
|
|
|
|
OBJECT:
|
|
TELEMAR NORTE LESTE S.A.,
with its head office located at General Polidoro nº99, in Botafogo, in the City and State of Rio De Janeiro, registered with the General
Roster of Corporate Taxpayers (CNPJ) under Nº. 33.000.118/0001-79, hereinafter referred to as
TMAR.
|
|
|
|
|
PURPOSE:
|
|
To assess the book value of TMAR’s shares in connection with the share exchange between TMAR and COARI, pursuant to Law No. 6,404, of Dec/15/1976 (Corporate
Law).
|
TABLE OF CONTENTS
1.
INTRODUCTION
APSIS CONSULTORIA EMPRESARIAL Ltda., hereinafter referred to as APSIS, with its head office located at Rua da
Assembléia, Nº. 35, 12th floor, in the City and State of Rio de Janeiro, registered with the General Roster of Corporate Taxpayers (CNPJ) under No 08.681.365/0001-30, was appointed to assess the book value of TMAR shares in connection
with the share exchange between TMAR and COARI, pursuant to Law No. 6,404 of 12/15/1976 (Corporate Law).
In preparing this report, we
used data and information provided by third parties, in the form of documents and verbal interviews with the client. Estimates used in this process are based on documents and information which include, among others, the following:
|
|
•
|
|
Balance Sheet of TMAR as of June 30, 2011.
|
APSIS has recently performed appraisals for publicly-held companies, for various purposes, of the following companies:
|
|
•
|
|
AMÉRICA LATINA LOGÍSTICA DO BRASIL S/A
|
|
|
•
|
|
ESTA-EMPRESA SANEADORA TERRITORIAL AGRÍCOLA S/A.
|
|
|
•
|
|
GEODEX COMMUNICATIONS DO BRASIL S/A
|
|
|
•
|
|
L.R. CIA.BRAS.PRODS.HIGIENE E TOUCADOR S/A
|
|
|
•
|
|
LIGHT SERVIÇOS DE ELETRICIDADE S/A
|
|
|
•
|
|
TAM TRANSPORTES AÉREOS MERIDIONAL S/A
|
The
APSIS team in charge of preparing this report comprises the following professionals:
Project manager
|
|
•
|
|
ANA CRISTINA FRANÇA DE SOUZA
|
Civil engineer
Post-graduate in Accounting Sciences (CREA/RJ
91.1.03043-4)
|
|
•
|
|
CESAR DE FREITAS SILVESTRE
|
Accountant (CRC/RJ 44779/O-3)
Accountant (CRC/RJ 022016-O-9)
|
|
•
|
|
LUIZ PAULO CESAR SILVEIRA
|
Mechanical engineer
Master of Business Management (CREA/RJ
89.1.00165-1)
|
|
•
|
|
MARGARETH GUIZAN DA SILVA OLIVEIRA
|
Civil engineer (CREA/RJ 91.1.03035-3)
|
|
•
|
|
RICARDO DUARTE CARNEIRO MONTEIRO
|
Civil engineer
Post-graduate in Economic Engineeering (CREA/RJ
30137-D)
|
|
•
|
|
SÉRGIO FREITAS DE SOUZA
|
Economist (CORECON/RJ 23521-0)
|
|
•
|
|
WASHINGTON FERREIRA BRAGA
|
Accountant (CRC/RJ 024.100-6 / CVM 6734)
2. PRINCIPLES
AND QUALIFICATIONS
This report strictly complies with the fundamental principles described below:
|
|
•
|
|
The consultants and appraisers do not have any direct or indirect interest in the companies involved in the share exchange, nor are there any other
circumstances which may characterize a conflict of interest.
|
|
|
•
|
|
To the best of the consultants’ knowledge and belief, the analyses, opinions and conclusions expressed in this Report are based on data,
diligence, research and surveys that are true and correct.
|
|
|
•
|
|
The report presents all the limiting conditions imposed by the adopted methodologies, which affect the analyses, opinions and conclusions contained
therein.
|
|
|
•
|
|
APSIS professional fees are not in any way whatsoever subject to the conclusions of this report.
|
|
|
•
|
|
APSIS assumes full responsibility for the matter of Appraisal Engineering, including implicit appraisals, and for the exercise of its honorable duties,
primarily established in the appropriate laws, codes or regulations.
|
|
|
•
|
|
In this Report, it is assumed that the information received from third parties is correct, and the sources thereof are contained in said report.
|
|
|
•
|
|
This Report was prepared by APSIS and no one other than the consultants themselves prepared the analyses and respective conclusions.
|
|
|
•
|
|
For projection purposes, we start with the premise of the inexistence of liens or encumbrances of any nature, whether judicial or extrajudicial,
affecting the companies in question, other than those listed in this Report.
|
|
|
•
|
|
This Report complies with the specifications and criteria prescribed by USPAP (Uniform Standards of Professional Appraisal Practice), in addition to
the requirements imposed by different bodies and regulations, where applicable, such as: Finance Ministry, the Central Bank of Brazil, Banco do Brasil, CVM (Brazilian Securities and Exchange Commission), SUSEP (Superintendence of Private Insurance),
RIR (Income Tax Regulations), etc.
|
|
|
•
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|
The managers of the companies involved did not direct, restrict, hinder or take any actions which have or may have compromised access to, use or
knowledge of information, assets, documents, or work methods applicable to the quality of the respective conclusions contained herein.
|
3.
RESPONSIBILITY LIMITS
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|
•
|
|
To prepare this report, APSIS used historic data and information, audited by third parties or unaudited, and unaudited projected data provided in
writing or verbally by the company’s management or obtained from the sources mentioned. Therefore, APSIS has assumed as true the data and information obtained for this report and does not have any responsibility in connection with its
truthfulness.
|
|
|
•
|
|
The scope of this work did not include an audit of the financial statements or a revision of the work performed by the company’s auditors.
|
|
|
•
|
|
Our work was developed for use by the requesting party in connection with the previously described objectives.
|
|
|
•
|
|
We do not take responsibility for occasional losses to the requesting party or to other parties as a result of the use of data and information provided
by the company and contained herein.
|
4. APPRAISAL
METHODOLOGY
Analysis of the previously mentioned supporting documents designed to ascertain whether bookkeeping was accurately conducted
and was in compliance with the legal, regulatory, normative, statutory and contractual provisions which govern the matter, within the scope of “Generally Accepted Accounting Principles and Conventions”.
We examined the balance sheet of TMAR, as well as all other documents required for the preparation of this report, which was prepared on the basis of
TMAR balance sheet for the period ending June 30, 2011.
It was ascertained that the assets and liabilities of TMAR have been duly
accounted for.
5. NET EQUITY
APPRAISAL
We examined the accounting books of TMAR, as well as all other documents required for the preparation of this report.
The experts have ascertained that the book net equity value of TMAR, in connection with the share exchange between TMAR and COARI is
equivalent to R$ 20,468,201,465.96 (twenty billion, four hundred and sixty eight million, two hundred and one thousand, four hundred and sixty five reais and ninety six centavos), as of June 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TELEMAR NORTE LESTE S.A.
|
|
ACCOUNTING STATEMENT
|
|
|
BALANCE SHEET (THOUSANDS REAIS)
|
|
BALANCE AS OF
6/30/2011
|
|
|
SUBSEQUENT
EVENT (1)
|
|
|
SUBSEQUENT
EVENT (2)
|
|
|
PRO FORMA
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
9,416,383,900.74
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
9,416,383,900.74
|
|
|
LONG TERM ASSETS
|
|
|
6,998,920,843.93
|
|
|
|
0.00
|
|
|
|
-8,922,405.01
|
|
|
|
6,989,998,438.92
|
|
|
INVESTMENTS
|
|
|
27,378,876,033.08
|
|
|
|
-16,382,514,682.93
|
|
|
|
0.00
|
|
|
|
10,996,361,350.15
|
|
|
- Coari Participações S.A.
|
|
|
16,382,514,682.93
|
|
|
|
-16,382,514,682.93
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
- Investments in Other Subsidiaries
|
|
|
10,925,493,375.52
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
10,925,493,375.52
|
|
|
- Goodwill in other Subsidiaries
|
|
|
16,727.59
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
16,727.59
|
|
|
- Other Investments
|
|
|
70,851,247.04
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
70,851,247.04
|
|
|
FIXED ASSETS
|
|
|
8,826,996,905.54
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
8,826,996,905.54
|
|
|
INTANGIBLE ASSETS
|
|
|
354,056,053.51
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
354,056,053.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
52,975,233,736.80
|
|
|
|
-16,382,514,682.93
|
|
|
|
-8,922,405.01
|
|
|
|
36,583,796,648.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
5,460,889,572.96
|
|
|
|
-1,074,598,034.67
|
|
|
|
0.00
|
|
|
|
4,386,291,538.29
|
|
|
Loans and Financing
|
|
|
2,394,530,961.51
|
|
|
|
-1,074,598,034.67
|
|
|
|
0.00
|
|
|
|
1,319,932,926.84
|
|
|
Other Current Liabilities
|
|
|
3,066,358,611.45
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
3,066,358,611.45
|
|
|
LONG TERM LIABILITIES
|
|
|
26,740,885,965.00
|
|
|
|
-15,011,582,320.39
|
|
|
|
0.00
|
|
|
|
11,729,303,644.61
|
|
|
Loans and Financing
|
|
|
23,230,663,413.39
|
|
|
|
-15,011,582,320.39
|
|
|
|
0.00
|
|
|
|
8,219,081,093.00
|
|
|
Other Non-Current Liabilities
|
|
|
3,510,222,551.61
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
3,510,222,551.61
|
|
|
EQUITY
|
|
|
20,773,458,198.84
|
|
|
|
-296,334,327.87
|
|
|
|
-8,922,405.01
|
|
|
|
20,468,201,465.96
|
|
|
Capital
|
|
|
11,624,809,217.95
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
11,624,809,217.95
|
|
|
Capital Reserves Available
|
|
|
3,086,540,194.43
|
|
|
|
-1,253,206,543.28
|
|
|
|
0.00
|
|
|
|
1,833,333,651.15
|
|
|
Non-available Capital Reserves
|
|
|
758,546,168.74
|
|
|
|
-28,657,208.84
|
|
|
|
0.00
|
|
|
|
729,888,959.90
|
|
|
Distributable Profit Reserves
|
|
|
6,177,475,630.88
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
6,177,475,630.88
|
|
|
Non-Distributable Profit Reserves
|
|
|
95,011,245.46
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
95,011,245.46
|
|
|
Preferred Stocks in Treasury
|
|
|
-28,657,208.84
|
|
|
|
28,657,208.84
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
Equity Valuation Adjustments
|
|
|
-1,281,659,496.69
|
|
|
|
956,872,215.41
|
|
|
|
0.00
|
|
|
|
-324,787,281.28
|
|
|
Net Income
|
|
|
341,392,446.91
|
|
|
|
0.00
|
|
|
|
-8,922,405.01
|
|
|
|
332,470,041.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
52,975,233,736.80
|
|
|
|
-16,382,514,682.93
|
|
|
|
-8,922,405.01
|
|
|
|
36,583,796,648.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Split-off of a portion of the shareholders’ equity of TMAR.
|
|
(2)
|
Loss of tax benefits following the split-off referenced in footnote (1).
|
6. CONCLUSION
Considering the verifications performed on the previously mentioned documents and based on APSIS’ analyses, the experts have
concluded that the book net equity value of TMAR, in connection with the share exchange between TMAR and COARI is equivalent to R$ 20,468,201,465.96 (twenty billion, four hundred and sixty eight million, two hundred and one thousand, four hundred
and sixty five reais and ninety six centavos) as of June 30, 2011.
Having concluded Report RJ-0375/11-02, which consists of 09 (nine)
pages typed on one side and 02 (two) attachments and reproduced in 03 (three) original counterparts, APSIS Consultoria Empresarial Ltda., CRC/RJ 005112/0-9 and CORECON/RJ RF/2.052-4, a company specializing in the appraisal of assets, legally
represented by the signatories below, makes itself available for any clarifications which may be necessary.
Rio de Janeiro, August 12,
2011.
|
|
|
|
|
|
|
LUIZ PAULO CESAR SILVEIRA
|
|
BETINA DENGLER
|
|
WASHINGTON FERREIRA BRAGA
|
|
Director
|
|
Project Manager
|
|
Accountant (CRC/RJ 024.100-6 /CVM 6734)
|
7. LIST OF
ATTACHMENTS
|
|
2.
|
GLOSSARY AND APSIS’ PROFILE
|
|
|
|
|
|
SÃO PAULO - SP
Alameda Franca, 1467 n° 44
Jardim Paulista, CEP: 01422-001
Tel.: + 55 11 2626.0510 Fax: + 55 11 3061-5879
|
|
RIO DE JANEIRO - RJ
Rua da Assembleia, nº 35, 12º andar
Centro, CEP: 20011-001
Tel.: + 55 21 2212.6850
Fax: + 55 21 2212.6851
|
ATTACHMENT 1
TMAR PRO-FORMA BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS OF
06/30/2011
|
|
|
TELEMAR SPLIT-OFF
|
|
|
PRO-FORMA
BALANCE
|
|
|
TELEMAR SPLIT-
OFF
|
|
|
PRO-FORMA
BALANCE
|
|
|
11 - CURRENT
|
|
|
9,416,383,900.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
9,261,054,948.34
|
|
|
|
|
|
|
|
9,261,054,948.34
|
|
|
|
|
|
|
|
9,261,054,948.34
|
|
|
|
|
|
|
|
|
|
Non-Current Assets
|
|
|
42,523,132,006.92
|
|
|
|
(16,382,514,682.93
|
)
|
|
|
26,140,617,323.99
|
|
|
|
(8,922,405.01
|
)
|
|
|
26,131,694,918.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
27,378,876,019.88
|
|
|
|
(16,382,514,682.93
|
)
|
|
|
10,996,361,336.95
|
|
|
|
|
|
|
|
|
|
|
Investments in Coari
|
|
|
16,382,514,628.93
|
|
|
|
(16,382,514,682.93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in other subsidiries
|
|
|
10,954,757,270.62
|
|
|
|
|
|
|
|
10,954,757,270.62
|
|
|
|
|
|
|
|
10,954,757,270.62
|
|
|
Other investments
|
|
|
41,604,066.33
|
|
|
|
|
|
|
|
41,604,066.33
|
|
|
|
|
|
|
|
41,604,066.33
|
|
|
Other non-current assets
|
|
|
5,963,203,027.99
|
|
|
|
|
|
|
|
5,963,203,027.99
|
|
|
|
(8,922,405.01
|
)
|
|
|
5,954,280,622.98
|
|
|
12.2.3 - PROPERTIES FOR INVESTMENTS
|
|
|
287,892,386.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.3 - FIXED ASSETS
|
|
|
8,539,104,518.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
8,226,996,905.54
|
|
|
|
|
|
|
|
8,226,996,905.54
|
|
|
|
|
|
|
|
8,226,996,905.54
|
|
|
12.4 - INTANGIBLE ASSETS
|
|
|
354,056,053.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets
|
|
|
354,056,053.51
|
|
|
|
|
|
|
|
354,056,053.51
|
|
|
|
|
|
|
|
354,056,053.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
51,784,186,955.26
|
|
|
|
(16,382,514,682.93
|
)
|
|
|
35,401,672,272.33
|
|
|
|
(8,922,405.01
|
)
|
|
|
35,392,749,867.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TMAR PRO-FORMA BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS OF
06/30/2011
|
|
|
TELEMAR SPLIT-OFF
|
|
|
PRO-FORMA
BALANCE
|
|
|
TELEMAR SPLIT-
OFF
|
|
|
PRO-FORMA
BALANCE
|
|
|
21.5 - LOANS AND FINANCING
|
|
|
1,640,125,018.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.6 - HEDGING TRANSACTIONS
|
|
|
736,706,669.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
5,277,565,694.78
|
|
|
|
(1,074,598,034.67
|
)
|
|
|
4,202,967,660.11
|
|
|
|
|
|
|
|
4,202,967,660.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing
|
|
|
2,376,831,688.31
|
|
|
|
(1,074,598,034.67
|
)
|
|
|
1,302,233,653.64
|
|
|
|
|
|
|
|
1,302,233,653.64
|
|
|
Other current liabilities
|
|
|
2,900,734,006.47
|
|
|
|
|
|
|
|
2,900,734,006.47
|
|
|
|
|
|
|
|
2,900,734,006.47
|
|
|
|
|
|
|
|
|
|
22.3 - LOANS AND FINANCING
|
|
|
21,845,604,676.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.5 - HEDGING TRANSACTIONS
|
|
|
385,763,737.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Liabilities
|
|
|
25,733,163,061.64
|
|
|
|
(15,011,582,320.39
|
)
|
|
|
10,721,580,741.25
|
|
|
|
|
|
|
|
10,721,580,741.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing
|
|
|
22,231,368,413.39
|
|
|
|
(15,011,582,320.39
|
)
|
|
|
7,219,786,093.00
|
|
|
|
|
|
|
|
7,219,786,093.00
|
|
|
Other non-current liabilities
|
|
|
3,501,794,648.25
|
|
|
|
|
|
|
|
3,501,794,648.25
|
|
|
|
|
|
|
|
3,501,794,648.25
|
|
|
23 - SHAREHOLDERS EQUITY
|
|
|
20,773,458,198.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity
|
|
|
20,773,458,198.84
|
|
|
|
(296,334,327.87
|
)
|
|
|
20,477,123,870.97
|
|
|
|
(8,922,405.01
|
)
|
|
|
20,468,201,465.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.0 - SHARE CAPITAL
|
|
|
11,624,809,217.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29110000 - COMMON SHARES
|
|
|
5,835,190,442.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29110100 - PREFERRED SHARES
|
|
|
5,796,135,351.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29110110 - SUBSCRIBED CAPITAL TO BE PAID-IN
|
|
|
(6,516,576.66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
11,624,809,217.95
|
|
|
|
|
|
|
|
11,624,809,217.95
|
|
|
|
|
|
|
|
11,624,809,217.95
|
|
|
23.1.0 - CAPITAL RESERVES
|
|
|
3,845,086,363.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210000 - GOODWILL
|
|
|
1,876,237,552.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210010 - SPECIAL GOODWILL RESERVE - MERGER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210020 - GOODWILL RESERVE -SALE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210030 - SPECIAL RESERVE - MERGER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210100 - DONATIONS - PUBLIC CORPORATIONS
|
|
|
6,058,818.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210110 - DONATIONS AND SUBSIDIES - OTHERS
|
|
|
248,076,680.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210120 - TAX INCENTIVE
|
|
|
375,816,150.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210200 - INTEREST OVER WORKS IN PROGRESS
|
|
|
1,210,302,641.86
|
|
|
|
(1,253,206,543.28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210300 - C.M. SPECIAL LAW 8200/91
|
|
|
2,189,645.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29210400 - OTHER CAPITAL RESERVES
|
|
|
1,195,257.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29510000 - COMPENSATION BASED ON SHARES
|
|
|
93,239,829.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29510010 - REFLEXIVE REM. RESERVES BASED ON SHARES
|
|
|
31,969,786.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available capital reserves
|
|
|
3,086,540,194.43
|
|
|
|
(1,253,206,543.28
|
)
|
|
|
1,833,333,651.15
|
|
|
|
|
|
|
|
1,833,333,651.15
|
|
|
Non-available capital reserves
|
|
|
758,546,168.74
|
|
|
|
(28,657,208.84
|
)
|
|
|
729,888,959.90
|
|
|
|
|
|
|
|
729,888,959.90
|
|
|
23.1.2 - PROFIT RESERVES
|
|
|
6,272,486,876.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220000 - LEGAL RESERVE
|
|
|
95,011,245.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220030 - RETAINED EARNINGS RESERVE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220040 - INVESTMENT RESERVE
|
|
|
6,177,475,630.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220060 - TAX INCENTIVE RESERVE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributable profit reserves
|
|
|
6,177,475,630.88
|
|
|
|
|
|
|
|
6,177,475,630.88
|
|
|
|
|
|
|
|
6,177,475,630.88
|
|
|
Non-distributable profit reserves
|
|
|
95,011,245.46
|
|
|
|
|
|
|
|
95,011,245.46
|
|
|
|
|
|
|
|
95,011,245.46
|
|
|
23.4 - SHARES IN TREASURY
|
|
|
(28,657,208.84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29410000 - COMMON SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29420000 - PREFERRED SHARES
|
|
|
(28,657,208.84
|
)
|
|
|
28,657,208.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29499999 - INITIAL CHARGE BALANCE - EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares in treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares in treasury
|
|
|
(28,657,208.84
|
)
|
|
|
28,657,208.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.5 - EQUITY VALUATION ADJUSTMENTS
|
|
|
(1,281,659,496.69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610100 - DERIVATIVES TRANSACTIONS
|
|
|
(7,948,720.91
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610110 - GOODWILL - CAPITAL TRANSACTIONS
|
|
|
(1,750,221,948.58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610120 - ADDITIONAL PAID-IN CAPITAL
|
|
|
699,701,072.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610130 - RESERVE - HEDGE ACCOUNT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610140 - VARIATION IN INVESTMENT PARTICIPATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610150 - VARIATION IN FINANCIAL ASSETS
|
|
|
(225,892,464.96
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity valuation adjustments
|
|
|
(1,281,659,496.69
|
)
|
|
|
956,872,215.41
|
|
|
|
(324,787,281.28
|
)
|
|
|
|
|
|
|
(324,787,281.28
|
)
|
|
29310000 - ACCUMULATED GAIN (LOSS)
|
|
|
(4,654,462,388.71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29310010 - GAIN (LOSS) FOR THE PERIOD
|
|
|
4,654,647,557.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.3 - GAIN (LOSS) FOR THE PERIOD
|
|
|
341,207,278.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results for the period
|
|
|
341,392,446.91
|
|
|
|
341,392,446.91
|
|
|
|
341,392,446.91
|
|
|
|
(8,922,405.01
|
)
|
|
|
332,470,041.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity
|
|
|
51,784,186,955.26
|
|
|
|
(16,382,514,682.93
|
)
|
|
|
35,401,672,272.33
|
|
|
|
(8,922,405.01
|
)
|
|
|
35,392,749,867.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net worth to be incorporated by Coari
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,468,201,465.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATTACHMENT 2
ABL - Gross Leasable Area
ABNT - Brazilian Technical Standards Association
Allocated Codes - serial number (grades or
weights) to differentiate the quality features of properties.
Allotment - subdivision of a tract of land into lots for buildings with the
opening of new thoroughfares, or the extension, modification or expansion of existing ones.
Amortization - systematic allocation of the
depreciable value of an asset over its useful life.
Apparent Age - estimated age of a property according to its characteristics and
conservation status at the time of inspection.
Asset - a resource controlled by the entity as a result of past events from which future
economic benefits are expected for the entity.
Asset Approach - valuation of companies where all assets (including those not accounted for)
have their values adjusted to the market. Also known as market net equity.
Base Date - specific date (day, month and year) of application of
the assessment value.
Basic Infrastructure - urban rainwater drainage equipment, street lighting, sewage system, drinking water, public and
home electricity supply and access routes.
BDI - a percentage that indicates the benefits and overhead costs applied to the direct cost of
construction.
Best Use of the Property - the most economically appropriate use of a certain property according to its characteristics and
surroundings, respecting legal limitations.
Beta - a systematic risk measure of a share; price trend of a particular share to be correlated with
changes in a given index.
Book Value - the value at which an asset or liability is recognized on the balance sheet.
Building Standard - the quality of the improvements according to the specifications of design, materials, workmanship and performance effectively used in
construction.
Business Combination - union of separate entities or businesses producing financial statements of a single reporting entity.
Transaction or other event by which an acquirer obtains control of one or more businesses, regardless of the legal form of operation.
Business Risk - uncertainty of realization of expected future returns of the business resulting from factors other than financial leverage.
CAPEX (Capital Expenditure) - fixed asset investments.
Capitalization - conversion of a simple period of economic benefits into value.
CAPM (Capital
Asset Pricing Model) - model in which the capital cost for any share or lot of shares equals the risk free rate plus risk premium provided by the systematic risk of the share or lot of shares under investigation. Generally used to calculate the Cost
of Equity or the Cost of Shareholder Capital.
Capitalization Rate - any divisor used to convert economic benefits into value in a single
period.
Capital Structure - composition of a company’s invested capital, between own capital (equity) and third-party capital (debt).
Cash Flow - cash generated by an asset, group of assets or business during a given period of time. Usually the term is supplemented by a
qualification referring to the context (operating, non-operating, etc...).
Cash Flow on Invested Capital - cash flow generated by the company to be reverted to lenders (interest and
amortizations) and shareholders (dividends) after consideration of cost and operating expenses and capital investments.
Cash-Generating Unit
- smallest identifiable group of assets generating cash inflows that are largely independent on inputs generated by other assets or groups of assets.
Casualty - an event that causes financial loss.
Company - commercial or industrial entity,
service provider or investment entity holding economic activities.
Conservation Status - physical status of an asset in result of its
maintenance.
Control - power to direct the strategic policy and administrative management of a company.
Control Premium - value or percentage of the pro-rata value of a lot of controlling shares over the pro-rata value of non-controlling shares, which
reflect the control power.
Cost - the total direct and indirect costs necessary for production, maintenance or acquisition of an asset at a
particular time and situation.
Cost of Capital - Expected rate of return required by the market as an attraction to certain investment funds.
CPC - Accounting Pronouncements Committee.
Current Value - value replacement with a new value depreciated as a result of the physical state the property is in.
CVM - Securities and Exchange Commission.
Damage - damage caused to others by the occurrence of flaws, defects, accidents and crimes, among others.
Data Treatment - application of operations to express, in relative terms, the attribute differences between the market data and data of the property being assessed.
Date of Issue - closing date of the valuation report, when conclusions are conveyed to the client.
DCF (Discounted Cash Flow) - discounted cash flow.
D & A - depreciation and amortization.
Dependent Variable - variable to be explained by the
independent ones.
Depreciable Value - cost of the asset, or other amount that substitutes such cost (financial statements), less its residual
value
Depreciation - systematic allocation of the depreciable value of an asset during its useful life.
Dichotomous Variable - variable that assumes only two values.
Direct Production Cost - spending on inputs, including labor, in the production of goods.
Discount for Lack of Control - value or percentage deducted from the pro-rata value of 100% of the value of a company that reflects the absence of part
or all of the control.
Discount for Lack of Liquidity - value or percentage deducted from the pro-rata value of 100% of the value
of a company that reflects the lack of liquidity.
Discount Rate - any divisor used to convert a flow of future economic benefits into present
value.
Drivers - value drivers or key variables.
EBIT (Earnings before Interest and Taxes) - earnings before interest and taxes.
EBITDA (Earnings
before Interest, Taxes, Depreciation and Amortization) - earnings before interest, taxes, depreciation and amortization.
Economic Benefits -
benefits such as revenue, net profit, net cash flow, etc.
Efficient Use - that which is recommendable and technically possible for the
location on a reference date, among the various uses permitted by the applicable law, observing surrounding marketing trends.
Electrical
Damage Value - estimated cost of the repair or replacement of parts, when the property suffers electrical damage. Values are tabulated in percentages of the Replacement Value and have been calculated through the study of equipment manuals and the
expertise in corrective maintenance of Apsis technicians.
Enterprise - set of properties capable of producing revenue through marketing or
economic exploitation. It can be: real estate (e.g. subdivision, commercial / residential buildings), real-estate based (e.g., hotel, shopping mall, theme parks), industrial or rural.
Enterprise Value - economic value of the company.
Equity Value - economic value of the equity.
Equivalent Construction Area - constructed area on which the unit cost equivalence of corresponding construction is applied, according to
ABNT postulates.
Equivalent Depth - numerical result of the division of a lot area by its main projected front.
Expertise - technical activity performed by a professional with specific expertise to investigate and clarify facts, check the status of property,
investigate the causes that motivated a particular event, appraise assets, their costs, results or rights.
Facilities - set of materials,
systems, networks, equipment and operational support services for a single machine, production line or plant, according to the degree of aggregation.
Fair Market Value - value at which an asset could have its ownership exchanged between a potential seller and a potential buyer, when both parties have reasonable knowledge of relevant facts and neither
is under pressure to do so.
Fair Value Less Cost to Sell - value that can be obtained from the sale of an asset or cash-generating unit less
sale expenses, in a transaction between knowledgeable, willing and uninterested parties.
FCFF (Free Cash Flow to Firm) - Free cash flow to
firm, or unlevered free cash flow.
Financial Lease - that which substantially transfers all the risks and benefits related to the ownership
of the asset, which may or may not eventually be transferred. Leases that are not financial leases are classified as operating leases.
Fixed
Asset - tangible asset available for use in the production or supply of goods or services, in third-party leasing, investments, or for management purposes, expected to be used for more than one accounting period.
Flaw - anomaly that affects the performance of products and services, or makes them inadequate to the purposes intended, causing inconvenience or
material loss to the consumer.
Forced Liquidation - condition on the possibility of a compulsory sale or in a shorter period than the
average absorption by the market.
Free Float - percentage of outstanding shares on the company’s total capital.
Frontage - horizontal projection of the line dividing the property and the access road; measurement of the front of a building.
Goodwill - see Goodwill based on the expectation of future profitability (goodwill).
Homogenization - treatment of observed prices by application of mathematical transformations that express, in relative terms, the differences between market data attributes and those of the property
assessed.
Homogenized Area - useful or private area, or built with mathematical treatments for valuation purposes, according to criteria
based on the real estate market.
IAS (International Accounting Standards) - International Accounting Standards.
IASB (International Accounting Standards Board) - International Accounting Standards Board.
Ideal Fraction - percentage owned by each of the buyers (tenants) of the land and of the building’s common items.
IFRS (International Financial Reporting Standards) - International Financial Reporting Standards, a set of international accounting pronouncements published and reviewed by the IASB.
Impairment - see Losses on devaluation
Impairment Losses (impairment) - book value of the asset that exceeds, in the case of
stocks, its selling price less the cost to complete it and expense of selling it; or, in the case of other assets, their fair value less expenditure for sale.
Income Approach - valuation method for converting the present value of expected economic benefits.
Independent Variables - variables that provide a logical content to the formation of the value of the property subject to the assessment.
Indirect Production Cost - administrative and financial costs, benefits and other liens and charges necessary for the production of goods.
Influence Point - atypical point that, when removed from the sample, significantly changes the estimated parameters or the linear structure of the model.
Insurance - risk transfer guaranteed by contract whereby one party undertakes, subject to payment of premium, to indemnify another for the
occurrence of casualties covered under the policy.
Insurance Value - value at which an insurance company assumes the risks, and does not
apply to the land and foundations, except in special cases.
Intangible Asset - identifiable non-monetary asset without physical substance.
This asset is identifiable when: it is separable, i.e., capable of being separated or divided from the entity and sold, transferred, licensed, leased or exchanged, either alone or together with the related contract, asset or liability; or originates
from contractual rights or other legal rights regardless of their being transferred, separable from the entity or from other rights and obligations.
Internal Rate of Return - discount rate where the present value of future cash flow is equivalent to the cost of investment.
International Accounting Standards - standards and interpretations adopted by the IASB. They include:
International Financial Reporting Standards (IFRS) International Accounting Standards (IAS) and interpretations developed by the Interpretation Committee on International Financial Reporting Standards (IFRIC) or by the former Standing
Interpretations Committee (SIC).
Invested Capital - the sum of own capital and third-party capital invested in a company. Third-party capital
is usually related to debt with interest (short and long-term) and must be specified within the context of the valuation.
Investment Property
- property (land, building or building part, or both) held by the owner or lessee under the lease, both to receive payment of rent and for capital appreciation or both, other than for: use in the production or supply of goods or services, as well as
for administrative purposes.
Investment Value - value for a particular investor based on individual interests in the property in question. In
the case of business valuation, this value can be analyzed by different situations, such as the synergy with other companies of an investor, risk perceptions, future performance and tax planning.
Key Money - amount paid by the prospective tenant for signature or transfer of the lease contract, as compensation for the point of sale.
Key Variables - variables that, a priori, and traditionally have been important for the formation of property value.
Levered Beta - beta value reflecting the debt in capital structure.
Liability - present obligation that arises from past events, whereby it is hoped that the settlement thereof will result in the inflow of funds from the entity embodying economic benefits.
Liquidation Value - value of a property offered for sale on the market outside the normal process, i.e. one that would be established if the property
were offered for sale separately, taking into account the costs involved and the discount required for a sale in a reduced period.
Liquidity
- ability to rapidly convert certain assets into cash or into the payment of a certain debt.
Market Approach - valuation method in which
multiple comparisons derived from the sales price of similar assets are adopted.
Market Data - set of information collected on the market
related to a particular property.
Marketing Factor - the ratio between the market value of an asset and its reproduction cost less
depreciation or replacement cost, which may be higher or lower than 1 (one).
Market Research - set of activities for identification, investigation, collection, selection, processing,
analysis and interpretation of results on market data.
Maximum Insurance Value - maximum value of the property for which it is recommendable
to insure it. This criterion establishes that the property whose depreciation is greater than 50% should have its Maximum Insurance Value equivalent to twice as much as the Current Value; and the property whose depreciation is with less than 50%
should have its Maximum Insurance Value equivalent to the Replacement Value.
Multiple - market value of a company, share or invested capital,
divided by a valuation measurement of the company (EBITDA, income, customer volume, etc...).
Net Debt - cash and cash equivalents, net
position in derivatives, short-term and long-term financial debts, dividends receivable and payable, receivables and payables related to debentures, short-term and long-term deficits with pension funds, provisions, and other credits and obligations
to related parties, including subscription bonus.
Non-Operating Assets - those not directly related to the company’s operations (may or may not generate
revenue) and that can be disposed of without detriment to its business.
Null hypothesis in a regression model - hypothesis in which one or a
set of independent variables involved in the regression model are not important to explain the variation of the phenomenon in relation to a pre-established significance level.
Operating Assets - assets that are basic to the company’s operations.
Operating Lease -
that which does not substantially transfer all the risks and benefits incidental to the ownership of the asset. Leases that are not operating leases are classified as financial leases.
Parent Company - an entity that has one or more subsidiaries.
Perpetual Value - value at the end
of the projective period to be added on the cash flow.
Point of Sale - intangible asset that adds value to commercial property, due to its
location and expected commercial exploitation.
Population - total market data of the segment to be analyzed.
Premium for Expected Future Profitability (goodwill) - future economic benefits arising from assets not capable of being individually identified or
separately recognized.
Present Value - the estimated present value of discounted net cash flows in the normal course of business.
Price - the amount by which a transaction is performed involving a property, a product or the right thereto.
Private Area - useful area plus building blocks (such as walls, pillars, etc.) and elevator hallway (in
specific cases).
Property - something of value, subject to use, or that may be the object of a right, which integrates an equity.
Qualitative Variables - variables that cannot be measured or counted, only ordered or ranked, according to attributes inherent to the property (e.g.,
building standard, conservation status and quality of the soil).
Quantitative Variables - variables that can be measured or counted (e.g.,
private area, number of bedrooms and parking spaces).
Range for Real Estate Valuations - range in the vicinity of the point estimator adopted
in the valuation within which to arbitrate the value of the property provided it is justified by the existence of features that are not contemplated in the model.
Re (Cost of Equity) - return required by shareholders for the capital invested.
Real Estate -
property, consisting of land and any improvements incorporated thereto. Can be classified as urban or rural, depending on its location, use or to its highest and best use.
Recoverable Value - the highest fair value of an asset (or cash-generating unit) minus the cost of sales compared with its value in use.
Rd (Cost of Debt) - a measure of the amount paid for the capital earned from third parties, in the form of loans, financing, market funding, among others.
Reference Real Estate - market data with features comparable to the property assessed.
Regression Model - the model used to represent a specific phenomenon, based on a sample, considering the
various influencing characteristics.
Remaining Life - Property’s remaining life.
Replacement Cost - a property’s reproduction cost less depreciation with the same function and features comparable to the property assessed.
Replacement Value for New - value based on what the property would cost (usually in relation to current market prices) to be replaced with or
substituted by a new, equal or similar property.
Reproduction Cost - expense required for the exact duplication of a property, regardless of
any depreciation.
Reproduction Cost Less Depreciation - a property’s reproduction cost less depreciation, considering the state it is
in.
Residual Value - value of new or used asset projected for a date limited to that in which it becomes scrap, considering its being in
operation during the period.
Residual Value of an Asset - estimated value that the entity would obtain at present with the sale of the asset,
after deducting the estimated costs thereof, if the asset were already at the expected age and condition at the end of its useful life.
Sample - set of market data representative of a population.
Scrap Value - market value of a property’s reusable materials in disabling conditions, without their being used for production purposes.
Shareholders’ Equity at Market Prices - see Assets Approach.
Statistical Inference - part
of statistical science that allows drawing conclusions about the population from a sample.
Subsidiary - entity, including that with no legal
character, such as an association, controlled by another entity (known as the parent company).
Supporting Documentation - documentation
raised and provided by the client on which the report premises are based.
Survey - evidence of local events through insightful observations
in a property and of the factors and conditions that constitute or influence it.
Tangible Asset - physically existing asset, such as land,
building, machinery, equipment, furniture and tools.
Technical Report - detailed report or technical clarification issued by a legally
qualified
and trained professional on a specific subject.
Total Construction Area - resulting
from the sum of the real private area and the common area allocated to an independent unit, defined according to ABNT.
Urbanizable Land -
land eligible to receive urban infrastructure works aiming at its efficient use, by means of the subdivision, split or implementation of a business.
Useful Area - real private area subtracted from the area occupied by walls and other building blocks that prevent or hinder its use.
Useful Economic Life - the period in which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset by the entity.
Valuation - act or process of determining the value of an asset.
Valuation Methodology - one or more approaches used in developing evaluative calculations for the indication of the value of an asset.
Value at Risk - representative value of the share of the property one wishes to insure and that may correspond to the maximum insurable value.
Value in Use - value of a property in operating conditions in its present state, such as the useful part of an industry, including, where
relevant, the costs of design, packaging, taxes, freight and installation.
Value Plan - the graphic representation or listing of generic
square meter values of land or of the real estate on the same date.
WACC (Weighted Average Cost of Capital) - model in which capital cost is
determined by the weighted average of the market value of capital structure components (own and others).
Exhibit 3.2. of Section II
Net Worth Appraisal Report at Market Prices
|
|
|
|
|
REPORT:
|
|
RJ-0375/11-05
|
|
|
|
|
BASE DATE:
|
|
June 30, 2011
|
|
|
|
|
REQUESTING PARTY:
|
|
TELEMAR NORTE LESTE S.A.,
with its head office located at Rua General Polidoro, No. 99, 5º andar (parte), in Botafogo, in
the city and state of Rio de Janeiro, registered with the General Roster of Corporate Taxpayers (CNPJ) under number 33.000.118/0001-79, hereinafter referred to as
TMAR
; and
COARI PARTICIPAÇÕES S.A.,
with its head office located at Rua
Humberto de Campos, No.425, 8º andar (parte), Leblon, in the city and state of Rio de Janeiro, registered with the General Roster of Corporate Taxpayers (CNPJ) under number 04.030.087/0001-09, hereinafter referred
COARI.
|
|
|
|
|
OBJECT:
|
|
TMAR
and
COARI
,
as described above.
|
|
|
|
|
PURPOSE:
|
|
Calculation of the Net Equity of both TMAR and COARI, following the appraisal of the equity of each of these companies pursuant to the same criteria and as of the same date, at
market prices, for the purposes of article 264 of Law No. 6,404 of 12/15/1976 (Corporate Law).
|
EXECUTIVE SUMMARY
APSIS CONSULTORIA EMPRESARIAL Ltda. (“APSIS”) was hired by TMAR and COARI to calculate the Net Equity of each of TMAR and COARI, following the appraisal of the equity of each of these companies
pursuant to the same criteria and as of the same date, at market prices, for the purposes of article 264 of Law No. 6,404 of 12/15/1976 (Corporate Law).
The technical procedures used in this report are in accordance with the criteria set forth by appraisal standards. Appraisal calculations to assess the value of assets were devised on the basis of the
income, asset and market approaches.
This report presents the market values of the companies’ assets and liabilities used to adjust the
book Net Equity of each of TMAR and COARI through asset approaches.
CORPORATE RESTRUCTURING OF OI GROUP: SUMMARY OF THE TRANSACTION
As described in the Statement of Material Fact published on May 24, 2011, Tele Norte Leste Participacoes SA (“TNL”), Telemar Norte Leste
SA (“Telemar”), Coari Participações SA (“Coari”) and Brasil Telecom SA (“BRT”), hereinafter together referred to as the OI COMPANIES, will implement a corporate restructuring (the “Corporate
Restructuring”) including the share exchange between TMAR and Coari and the mergers of Coari and TNL into BRT. As a result of the Corporate Restructuring, all current shareholders of the OI COMPANIES will become shareholders of BRT, which will
change its name to OI S.A. and will be the only one of the OI COMPANIES listed on a stock market.
The charts below show the simplified
corporate structure before and after the implementation of the Corporate Restructuring:
The following are the main steps of the Corporate Restructuring considered for adjustment in the financial
statements of the OI COMPANIES:
|
1.
|
Issuance and Redemption of shares by BRT;
|
|
2.
|
Share Exchange between TMAR and Coari;
|
|
3.
|
Merger of Coari into BRT;
|
|
4.
|
Merger of TNL into BRT.
|
SUMMARY OF RESULTS
The tables below present an overview of the Net Equity at market prices of the companies involved in the share exchange between TMAR and COARI, as of the base date of this report:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TELEMAR NORTE LESTE S.A. (TMAR)
|
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
|
BALANCE AS OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
SUBSEQUENT
EVENT
(2)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
12,101,697
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,101,697
|
|
|
|
-522,282
|
|
|
|
11,579,415
|
|
|
LONG TERM ASSETS
|
|
|
|
|
|
|
6,958,119
|
|
|
|
0
|
|
|
|
-8,922
|
|
|
|
6,949,197
|
|
|
|
0
|
|
|
|
6,949,197
|
|
|
INVESTMENTS
|
|
|
|
|
|
|
16,431,627
|
|
|
|
-16,382,515
|
|
|
|
0
|
|
|
|
49,112
|
|
|
|
0
|
|
|
|
49,112
|
|
|
- Investments in subsidiaries:
|
|
|
|
|
|
|
16,382,515
|
|
|
|
-16,382,515
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Coari Participações S.A.
|
|
|
100.00
|
%
|
|
|
16,382,515
|
|
|
|
-16,382,515
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Other Investments
|
|
|
|
|
|
|
49,112
|
|
|
|
0
|
|
|
|
0
|
|
|
|
49,112
|
|
|
|
0
|
|
|
|
49,112
|
|
|
FIXED ASSETS
|
|
|
|
|
|
|
14,305,484
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14,305,484
|
|
|
|
5,924,780
|
|
|
|
20,230,264
|
|
|
INTANGIBLE ASSETS
|
|
|
|
|
|
|
2,279,769
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,279,769
|
|
|
|
0
|
|
|
|
2,279,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
52,076,696
|
|
|
|
-16,382,515
|
|
|
|
-8,922
|
|
|
|
35,685,259
|
|
|
|
5,402,499
|
|
|
|
41,087,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
7,332,068
|
|
|
|
-1,074,598
|
|
|
|
0
|
|
|
|
6,257,470
|
|
|
|
0
|
|
|
|
6,257,470
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
23,933,987
|
|
|
|
-15,011,582
|
|
|
|
0
|
|
|
|
8,922,405
|
|
|
|
1,836,850
|
|
|
|
10,759,254
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
|
37,183
|
|
|
|
0
|
|
|
|
0
|
|
|
|
37,183
|
|
|
|
6,466
|
|
|
|
43,649
|
|
|
EQUITY
|
|
|
|
|
|
|
20,773,458
|
|
|
|
-296,334
|
|
|
|
-8,922
|
|
|
|
20,468,201
|
|
|
|
3,559,183
|
|
|
|
24,027,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
52,076,696
|
|
|
|
-16,382,515
|
|
|
|
-8,922
|
|
|
|
35,685,259
|
|
|
|
5,402,499
|
|
|
|
41,087,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Split-off of a portion of the shareholders’ equity of TMAR.
|
|
(2)
|
Loss of tax benefits following the split-off referenced in footnote (1).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COARI PARTICIPAÇÕES S.A. (COARI)
|
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
|
|
|
BALANCE AS
OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
SUBSEQUENT
EVENT
(2)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
938,789
|
|
|
|
0
|
|
|
|
0
|
|
|
|
938,789
|
|
|
|
0
|
|
|
|
938,789
|
|
|
Cash and Cash Equivalents
|
|
|
|
|
|
|
195,229
|
|
|
|
740,221
|
|
|
|
0
|
|
|
|
935,450
|
|
|
|
0
|
|
|
|
935,450
|
|
|
Other Assets
|
|
|
|
|
|
|
740,221
|
|
|
|
-740,221
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
LONG TERM ASSETS
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
INVESTMENTS
|
|
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
- Investments in subsidiaries:
|
|
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
- Brasil Telecom S.A.
|
|
|
49.2829
|
%
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
FIXED ASSETS
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
INTANGIBLE ASSETS
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
16,385,791
|
|
|
|
0
|
|
|
|
0
|
|
|
|
16,385,791
|
|
|
|
1,635,496
|
|
|
|
18,021,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
763
|
|
|
|
0
|
|
|
|
1,074,598
|
|
|
|
1,075,361
|
|
|
|
0
|
|
|
|
1,075,361
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
2,515
|
|
|
|
0
|
|
|
|
15,011,582
|
|
|
|
15,014,097
|
|
|
|
0
|
|
|
|
15,014,097
|
|
|
EQUITY
|
|
|
|
|
|
|
16,382,513
|
|
|
|
0
|
|
|
|
-16,086,180
|
|
|
|
296,333
|
|
|
|
1,635,496
|
|
|
|
1,931,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
16,385,791
|
|
|
|
0
|
|
|
|
0
|
|
|
|
16,385,791
|
|
|
|
1,635,496
|
|
|
|
18,021,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1)
|
Represents amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued in the Corporate Restructuring.
|
|
2)
|
Incorporation of the portion of the shareholders’ equity of TMAR which was split-off.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VALUE ( THOUSAND REAIS )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COARI X TMAR
|
|
|
RELEVANT ACCOUNTS
|
|
PRO FORMA BALANCE
|
|
|
ADJUSTED BALANCE
|
|
|
|
|
COARI
|
|
|
TMAR
|
|
|
COARI
|
|
|
TMAR
|
|
|
ASSETS
|
|
|
16,385,791
|
|
|
|
35,685,259
|
|
|
|
18,021,287
|
|
|
|
41,087,757
|
|
|
CURRENT ASSETS
|
|
|
938,789
|
|
|
|
12,101,697
|
|
|
|
938,789
|
|
|
|
11,579,415
|
|
|
LONG TERM ASSETS
|
|
|
0
|
|
|
|
6,949,197
|
|
|
|
0
|
|
|
|
6,949,197
|
|
|
FIXED ASSETS
|
|
|
15,447,002
|
|
|
|
16,634,365
|
|
|
|
17,082,498
|
|
|
|
22,559,145
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
16,385,791
|
|
|
|
35,685,259
|
|
|
|
18,021,287
|
|
|
|
41,087,757
|
|
|
CURRENT LIABILITIES
|
|
|
1,075,361
|
|
|
|
6,257,470
|
|
|
|
1,075,361
|
|
|
|
6,257,470
|
|
|
LONG TERM LIABILITIES
|
|
|
15,014,097
|
|
|
|
8,922,405
|
|
|
|
15,014,097
|
|
|
|
10,759,254
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
0
|
|
|
|
37,183
|
|
|
|
0
|
|
|
|
43,649
|
|
|
EQUITY
|
|
|
296,333
|
|
|
|
20,468,201
|
|
|
|
1,931,828
|
|
|
|
24,027,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NUMBER OF SHARES
|
|
|
425,944
|
|
|
|
344,056,833
|
|
|
|
425,944
|
|
|
|
344,056,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R$ PER SHARE *
|
|
|
695.707992
|
|
|
|
59.490756
|
|
|
|
4,535.404391
|
|
|
|
69.835511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXCHANGE RATIO**
|
|
|
0.085511
|
|
|
|
|
|
|
|
0.015398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Adjusted to reflect the exclusion of treasury stock
|
|
**
|
Number of COARI shares for 1 TMAR share
|
TABLE OF CONTENTS
1. INTRODUCTION
APSIS CONSULTORIA EMPRESARIAL Ltda. (APSIS) was appointed by TMAR and COARI to calculate the Net Equity of each of TMAR and COARI, following the appraisal of the equity of both companies pursuant to the
same criteria and as of the same date, at market prices, for the purpose of article 264 of Law No. 6,404 of 12/15/1976 (Corporate Law).
In preparing this report, data and information supplied by third parties were used, in the form of documents and verbal interviews with the clients. The
estimates used in this process are based on documents and information which include, among others, the following:
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•
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Bylaws or Articles of Incorporation of the companies;
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•
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Financial statements of the group’s companies;
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•
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Organization chart and corporate holdings;
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•
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List of permanent assets;
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•
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IAN (Annual Reports) and ITR (Quarterly Reports) of the companies;
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•
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Set of architectural plans;
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•
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Documents with technical specifications of the equipment appraised.
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Inspections of the operational sites were conducted in March and April 2009.
The APSIS team
responsible for the coordination and performance of this report consists of the following professionals:
sales director
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•
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ANA CRISTINA FRANÇA DE SOUZA
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civil engineer
post-graduated in Accouting Sciences (CREA/RJ
91.1.03043-4)
project manager
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•
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CESAR DE FREITAS SILVESTRE
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accountant (CRC/RJ 44779/O-3)
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•
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CLAUDIO MARÇAL DE FREITAS
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accountant (CRC/RJ 55029/O-1)
accountant (CRC/RJ 022016-O-9)
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•
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LUIZ PAULO CESAR SILVEIRA
|
mechanical engineer
máster of business management (CREA/RJ
89.1.00165-1)
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•
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MARGARETH GUIZAN DA SILVA OLIVEIRA
|
civil engineer (CREA/RJ 91.1.03035-3)
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•
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RICARDO DUARTE CARNEIRO MONTEIRO
|
civil engineer
post-graduated in economic engineering (CREA/RJ
30137-D)
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•
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SÉRGIO FREITAS DE SOUZA
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economist (CORECON/RJ 23521-0)
2. PRINCIPLES AND QUALIFICATIONS
This report strictly complies with the fundamental principles described below:
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•
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The professional fees of APSIS are not, in any way, subject to the conclusions of this report.
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•
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The report was prepared by APSIS and no one, other than the consultants themselves, prepared the analyses and respective conclusions.
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•
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In this report, it is assumed that the information received from third parties is correct, and the sources thereof are contained in this Report.
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•
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To the best knowledge and belief of the consultants, the analyses, opinions and conclusions presented in this Report are based on data, diligence,
research and surveys that are true and correct.
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•
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APSIS assumes full responsibility for the matter of Appraisal Engineering, including implicit appraisals, and for the exercise of its honorable duties,
primarily established in the applicable laws, codes or regulations.
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•
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For projection purposes, we start from the premise of the nonexistence of liens or encumbrances of any nature, whether judicial or extrajudicial,
affecting the object of the relevant work, other than those listed in this report.
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•
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This report meets the specifications and criteria established by the standards of the Brazilian Association of Technical Standards (ABNT), the
specifications and criteria established by USPAP (Uniform Standards of Professional Appraisal Practice), in addition to the requirements imposed by different bodies, such as: the Treasury Department, the Central Bank of Brazil, CVM (the Brazilian
Securities and Exchange Commission), SUSEP (Private Insurance Superintendence), etc.
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•
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The report presents all the restrictive conditions imposed by the methodologies adopted, which affect the analyses, opinions and conclusions contained
in the same.
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•
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APSIS declares that neither it nor the consultants and appraisers have any direct or indirect interest in the companies contemplated in this Report, in
their respective controllers, or in the transaction to which the “Protocol and Justification” refers, there being no relevant circumstances which may characterize conflict or communion of interests, whether potential or actual, towards the
issuance of this Report.
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•
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In the course of our work, controllers and managers of the companies contemplated in this Report did not direct, limit, hinder or take any actions,
which have or may have compromised access, use or knowledge of information, property, documents or work methodologies relevant to the quality of our conclusions.
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•
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This Report was prepared in strict compliance with the postulates set forth in the Professional Code of Ethics of CONFEA - Federal Council of
Engineering, Architecture and Agronomy and of the Legal Institute of Engineering.
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3. RESPONSIBILITY LIMITS
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•
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To prepare this report, APSIS used historic data and information, audited by third parties or unaudited, and projected unaudited data supplied in
writing or verbally by the companies’ management or obtained from the sources mentioned. Therefore, APSIS assumed as true the data and information obtained for this report and does not have any responsibility in connection with its
truthfulness.
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•
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The scope of this work did not include an audit of the financial statements or a revision of the work performed by the companies’ auditors.
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Our work was developed for use by the applicant in connection with the previously described objectives. Therefore, it may be disclosed as part of the
documents related to the Corporate Restructuring, and the mention of this work in related publications is authorized. It may also be filed with the Brazilian Securities and Exchange Commission (the “CVM”) and with the U.S. Securities and
Exchange Commission (the “SEC”), as well as made available to shareholders and third parties, including through the websites of the involved companies.
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We emphasize that understanding the conclusion of this report will require reading it and its attachments in full. Therefore, conclusions should not be
drawn from a partial reading.
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We are not responsible for occasional losses to the applicant, its shareholders, directors, creditors or to other parties as a result of the use of
data and information supplied by the companies and contained in this Report.
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•
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The analyses and conclusions contained herein are based on several premises, held as of this date, of future operational projections, such as:
macroeconomic factors, values used in the market, exchange rate variations, sale prices, volumes, market share, revenues, taxes, investments, operational margins, etc. Thus, future results may differ from any forecast or estimate contained in this
Report.
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•
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This appraisal does not reflect events and their respective impacts, occurring after the date of issue of this Report.
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4. APPRAISAL METHODOLOGY
ASSETS APPROACH - NET EQUITY AT MARKET PRICES
This methodology is derived from generally accepted accounting principles (GAAP), where financial statements are prepared based on the principle of historic or acquisition cost.
Due to this principle and to the fundamental principle of accounting, the book value of the assets of a company less the book value of its liabilities
equals the book value of its net equity.
The application of this methodology contemplates, as a starting point, the book values of assets and
liabilities and requires that some of these items be adjusted so as to reflect their probable realization values. The result of the application of this method may provide an initial basis for the estimate of the company’s value, as well as a
useful basis of comparison with results from other methodologies.
On the other hand, the basic principles of economics allow us to create the
following appraisal technique: the value defined for assets less the value defined for liabilities equals the value defined for a company’s net equity. From an appraisal perspective, the relevant value definitions are those appropriate to the
purpose of the appraisal.
The assets approach, therefore, aims to appraise a company by adjusting the book value (net balance) to respective
fair market values. The assets and liabilities deemed relevant are appraised for their fair market value, with a comparison made between this value and its book value (net balance).
The general appraisal criteria applicable to the adjustment of assets subject to an appraisal at market prices can be found in detail in Chapter 6 of this report.
After being duly analyzed, these adjustments are added to the book Net Equity value, in this way determining the company’s market value through the
assets approach. The company’s fair market value is the Net Equity value after giving effect to the adjustments of the assets and liabilities appraised.
It is worth noting that the identification and quantification of liabilities that were neither recorded nor
disclosed by the companies’ managements were not within the scope of our work.
The methodology and scope adopted in this assessment is
aimed at appraising the companies’ going concern values. Therefore, expenses incurred in asset realization or liability requirements, as well as related to the companies’ bankruptcy or liquidation processes, were not contemplated in the
calculations.
PRINCIPLE STEPS OF THE APPRAISAL
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Reading and analysis of the companies’ balance sheets.
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Analysis of asset and liability accounts recorded on the companies’ balance sheets, to identify accounts subject to adjustments, as well as
calculations of their probable market values.
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Adjustment of the companies’ fixed assets in accordance with their respective market values on the basis of equity appraisals performed by Apsis.
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Adjustment of relevant intangible operating assets in accordance with their respective market values, on the basis of premises and appraisal criteria
developed by Apsis.
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Application of the equity method of accounting to the net equity at market value of subsidiary and affiliated companies for the purpose of calculating
the value of investments.
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•
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Calculation of the market value of the companies’ net equity.
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5. GENERAL APPRAISAL CRITERIA
This report was prepared for the purpose of complying with current legislation in connection with the Corporate Restructuring, as described in the
Executive Summary of this report.
EVENTS AND ADJUSTMENTS CONTEMPLATED IN THE APPRAISAL
The financial statements considered as the basis for this report were prepared by the companies, having already fully complied with Act No. 11.
638/07. The table below shows the general criteria defined for the appraisal of each account and/or group of accounts of the companies involved in the operation.
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ACCOUNT GROUP
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PREMISES
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APPRAISAL CRITERIA
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General
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Accounts whose value is less than R$500,000 reais were not analyzed; the book value was kept, with the exception of those that were consolidated in a specific group.
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Market value identical to book value.
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Available Funds
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Represented by:
• Cash and Banks
• Cash
Equivalents - Short-term investments, with original maturity being ninety days or less and immediately convertible into cash;
• Financial Investments - Exclusive investment funds and private
securities.
Cash equivalents and investments held by the Company and its
subsidiaries are classified as held for trading and are measured at their respective fair values.
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Market value identical to book value.
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ACCOUNT GROUP
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PREMISES
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APPRAISAL CRITERIA
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Accounts Receivable from Clients
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Substantially represented by:
• Services for billing
• Billed
services
• Sales of Goods
• Provision for
doubtful accounts constituted on the basis of individual analyses and on the analyses of groups of assets of similar risk, for which criteria for establishing the provision contemplates the ascertainment of percentiles of losses occurring in each
maturity range of accounts receivable and, on the grounds of such loss percentiles, future losses are estimated over the current balance of accounts receivable.
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Market value identical to book value.
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Inventories
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Substantially represented by cell phones and accessories for resale, net of provision for losses or for adjustments to the forecast in which they should be realized.
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Market value identical to book value.
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Derivatives
(Assets and Liabilities)
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Represented by:
• “Swap cross currency” contracts US$/R$:
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Market value identical to book value.
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ACCOUNT GROUP
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PREMISES
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APPRAISAL CRITERIA
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• Active Position - US$ + 5,86%
• Liability
Position - 100% CDI
• “Swap cross currency” contracts Iene/R$:
• Active
Position - Iene + Iene Libor 6M + 1,25%
• Liability Position - 85% a 90% CDI
• “Swap cross currency” contracts Iene/US$:
• Active
Position - Iene Libor 6m + 1,25%
• Liability Position - US Libor 6m + 3,59%
Hedging operations contracted with financial institutions to minimize the risks of
loans and financing contracted in foreign currency, without leverage, because of the possibility of fluctuations in exchange rates that may increase the balance of them. Portion of foreign currency debt in foreign currency 90.4% is covered by this
mode of operation and financial investments in foreign currency.
The
positive or negative effects in hedging transactions are measured at fair value using available information and appropriate valuation methodologies for each situation.
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ACCOUNT GROUP
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PREMISES
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APPRAISAL CRITERIA
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Deferred and Recoverable Taxes
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Represented by:
• Deferred Income Tax and Social Contribution - Calculated over temporary
differences, tax losses and the negative base of social contribution, and accounted for to the extent of the existence of future taxable profit at sufficient level for the total or partial use of deferred taxes.
• Tax Credits -
Composed of:
- ICMS (Provisional Value Added Tax)
- IRPJ/CS (Legal Entity Income Tax/Social Contribution)
- PIS & COFINS (Social Participation Program and Contribution to Social Security
Financing)
- Others
The ICMS recoverable originates, for the most part, from credits constituted on the
acquisition of fixed assets - Complementary Law No. 102/00.
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Market value identical to book value.
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ACCOUNT GROUP
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PREMISES
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APPRAISAL CRITERIA
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Judicial Deposits
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Represented by the balance of judicial deposits related to contingencies, which the balances are updated monetarily. The deposits are
in connection with the following contingencies:
• Labor
• Tax
• Civil
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Market value identical to book value.
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Assets Related to Pension Funds
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Represented by:
• Contribution of the sponsor without right of redemption by the participants who
left the Plan.
• Part of the Plan’s surplus, attributed to the sponsor.
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Market value identical to book value.
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Available Financial Assets for Sale
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Represented by the participation of 7.2% of TMAR in Portugal Telecom’s capital resulting from the acquisition of stake by
subscribing for the purchase and sale of shares to term.
The investment
was recorded under this heading, as required by the CPC 38.
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Market value identical to book value.
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ACCOUNT GROUP
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PREMISES
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APPRAISAL CRITERIA
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Others
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Substantially represented by:
• Prepaid Expenses
• Advances to
Suppliers
• Receivables
• Advances to
Employees
• Fiscal Benefits
• Other
Assets
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• Prepaid Expenses - The balance of the following prepaid
expenses were cancelled:
• Publicity and Advertisement
• Sponsor
• Financial
charges
• FOL
• Directories
• FISTEL
• Others
• Other Assets:
Maintained the book value taking into consideration that this asset was measured at its fair value.
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Participation in Subsidiary Companies
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Appraised through the Equity Method of Accounting.
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Balances were adjusted by the results of market value adjustments reflected in the net equities of the subsidiaries appraised.
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Other Investments
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Represented by other investments whose balances are stated net of provision for loss when applicable.
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Market value identical to book value.
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ACCOUNT GROUP
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PREMISES
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APPRAISAL CRITERIA
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Automatic Commutation Equipment, Means of Data Communication and Transmission, Termination and Infrastructure
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Assets of utmost importance for the business. Appraised at market prices on the basis of their replacement cost through the use of project parameters. Methodology and respective
calculations can be found in detail in Attachment 2.
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Market value identical to book value.
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Land and Buildings
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Appraised at market prices, with specific appraisal reports for applicable properties. A table comprising the summary of values per property can be found in
Attachment
3.
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Market value identical to book value.
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Work in Progress
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Assets whose book value is close to their market value, due to their being recent acquisitions.
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Market value identical to book value.
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Goodwill Surplus Value
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Goodwill determined in subsidiaries not valued.
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Market value identical to book value.
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Intangible
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Represented by:
• Goodwill in subsidiaries not valued
• Data
Processing System
• Formation of Intangibles
• Others
• Patents and
Brands
• Regulatory Licenses
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For purposes of compliance with article 264 of the Lei das S / A, the analyst chose the values of historical cost as the best reference, in order to remove the influence of the
projections of future scenarios present in the traditional methodologies of valuation at market prices of this group of assets.
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ACCOUNT GROUP
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PREMISES
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APPRAISAL CRITERIA
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Loans, Financing, Debentures, Derivative Financial Instruments and Intercompany Loans
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Represented by:
• Financial Institutions:
• Local
Currency
• Foreign Currency
• Financial and
Derivative Instruments
• Public Debentures
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Market value identical to book value.
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Suppliers
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|
Substantially represented by:
• Network Infrastructure Material
• Transfers
• Commissions on
sales
• Diverse Suppliers
The payments end in the short-term for all obligations.
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Market value identical to book value.
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Taxes, Fees and Contributions
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|
Represented by:
• ICMS (1) (Provisional Value Added Tax)
• PIS and COFINS
(Social Participation Program and Contribution)
• IRPJ (Legal Entity Income Tax) payable
• Social Contribution payable
• Others
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Maintained the book value, because it did not show signs of relevant market adjustments, except for the IR / CS, for which the balance was adjusted for the effects of income tax and
social contribution levied on adjustments to the market subject to such taxation.
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ACCOUNT GROUP
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PREMISES
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APPRAISAL CRITERIA
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Staff, Social Charges and Benefits
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Substantially represented by:
• Social Charges and Benefits
• Share Option
Plan
• Others
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Market value identical to book value.
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Authorization for Exploration of Services
|
|
Substantially represented by payable values to ANATEL for grants of radiofrequency and authorization of services from SMP and concession of STFC, obtained through
auctions.
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Market value identical to book value.
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Dividends, On Shareholders Equity Interest and Share of Net Income
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Represented by dividends and interest on shareholders’ equity net of withholding Income tax when applicable, payable to controlling and non-controlling
shareholders.
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Market value identical to book value.
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Refinancing Tax Program
|
|
• Referred to the values of the installments (REFIS 4)
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|
Market value identical to book value.
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ACCOUNT GROUP
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PREMISES
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APPRAISAL CRITERIA
|
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Provision for Contingencies
|
|
Represented by the balance of provisions for Labor, Tax and Civil contingencies whose risks are classified as PROBABLE, net of
judicial deposits and made on the grounds of legal requirements or caution.
In the appraisal of the company and its subsidiaries, contingencies classified pursuant to their chances of being incurred at a POSSIBLE or REMOTE risk
level, are not provisioned, albeit, in some cases, similar matters may be framed in different risk-level classifications, a fact which has been justified by the peculiar factual and procedural status of each process. However, in some situations,
judicial deposits are made on the grounds of legal requirements or caution.
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Market value identical to book value.
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Provision for Pension Funds and Other Benefits
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|
Substantially represented by the company’s and its subsidiaries’ sponsoring of complementary social security benefit plans,
relative to retirement benefits for assisted employees and participants.
For defined benefit plans, the Company and its subsidiaries have the immediate recognition of actuarial gains and losses, being made the full liabilities
for plans showing deficits.
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|
Market value identical to book value.
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|
ACCOUNT GROUP
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PREMISES
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APPRAISAL CRITERIA
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Other Accounts Payable
|
|
Substantially represented by :
|
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Market value identical to book value.
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|
|
|
|
|
|
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• Tax Credit Acquisition
Obligations
• Self-financing
Resources
• Other accounts payable
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|
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|
Net Equity
|
|
•
Adjustments at Market
Value-
Resulting from the appraisal of Assets, Rights and
Obligations, appraised at market value, net of tax effects.
|
|
Adjusted by the premium paid for the valued assets net of taxes.
|
6. APPRAISAL OF THE NET EQUITY AT MARKET PRICE OF TMAR
This report uses the assets approach for the appraisal of the Net Equity at market price of TMAR. In this approach, relevant assets and liabilities were
appraised so as to reflect their fair market value, according to the criteria detailed in Chapter 5.
RELEVANT ASSETS
As part of the Corporate Restructuring, TMAR will have part of its net book equity split-off. This split-off portion will be composed primarily of its
investment in COARI and certain debt, as detailed in the report RJ-0375/11-01:
Therefore, to arrive at the value of the Consolidated Net Equity at market prices of TMAR, it was necessary to
appraise TMAR’s relevant operating assets as they would exist following the split-off.
FIXED ASSETS
Property that integrates the fixed assets relating to equipment accounts are of the utmost relevance among the set of TMAR’s assets. Land and
buildings are assets of secondary importance within the telephony segment. Appraisal of these assets can be found in Attachment 2 hereof and in specific reports for the main real estate, and is summarized on the following table:
FIXED TELEPHONY’S FIXED ASSETS – REGION I
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FIXED ASSETS
|
|
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Automatic switching equipment
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|
|
1,511,906,627.38
|
|
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Transmission equipments
|
|
|
4,464,811,214.12
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|
|
Work in progress
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|
|
1,512,792,427.58
|
|
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Infrastructure
|
|
|
4,483,295,564.03
|
|
|
Buildings
|
|
|
973,880,035.98
|
|
|
Other assets
|
|
|
347,771,009.25
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|
|
|
|
|
|
|
|
TOTAL
|
|
|
13,294,456,878.34
|
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|
|
|
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|
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MOBILE’S FIXED ASSETS – REGION I and III
|
|
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|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
1,007,002,880.05
|
|
|
Transmission equipments
|
|
|
2,911,725,900.48
|
|
|
Work in progress
|
|
|
464,795,248.99
|
|
|
Infrastructure
|
|
|
1,044,996,518.31
|
|
|
Buildings
|
|
|
136,214,216.09
|
|
|
Other assets
|
|
|
271,628,254.91
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
5,836,363,018.82
|
|
|
|
|
|
|
|
APPRAISAL OF OTHER ASSETS AND LIABILITIES
For other assets and liabilities of TMAR, we used the criteria specified in Chapter 5, as shown on the calculation spreadsheets of Attachment 1.
VALUE OF THE NET EQUITY AT MARKET PRICE OF TMAR
The table below shows the value of the Net Equity at Market Price of TMAR as of the base date, with respective adjustments made in the main accounts,
considering the subsequent events this report:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TELEMAR NORTE LESTE S.A. (TMAR)
|
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
|
BALANCE
AS OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
SUBSEQUENT
EVENT
(2)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
12,101,697
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,101,697
|
|
|
|
-522,282
|
|
|
|
11,579,415
|
|
|
LONG TERM ASSETS
|
|
|
|
|
|
|
6,958,119
|
|
|
|
0
|
|
|
|
-8,922
|
|
|
|
6,949,197
|
|
|
|
0
|
|
|
|
6,949,197
|
|
|
INVESTMENTS
|
|
|
|
|
|
|
16,431,627
|
|
|
|
-16,382,515
|
|
|
|
0
|
|
|
|
49,112
|
|
|
|
0
|
|
|
|
49,112
|
|
|
- Investments in subsidiaries:
|
|
|
|
|
|
|
16,382,515
|
|
|
|
-16,382,515
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Coari Participações S.A.
|
|
|
100.00
|
%
|
|
|
16,382,515
|
|
|
|
-16,382,515
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Other Investments
|
|
|
|
|
|
|
49,112
|
|
|
|
0
|
|
|
|
0
|
|
|
|
49,112
|
|
|
|
0
|
|
|
|
49,112
|
|
|
FIXED ASSETS
|
|
|
|
|
|
|
14,305,484
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14,305,484
|
|
|
|
5,924,780
|
|
|
|
20,230,264
|
|
|
INTANGIBLE ASSETS
|
|
|
|
|
|
|
2,279,769
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,279,769
|
|
|
|
0
|
|
|
|
2,279,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
52,076,696
|
|
|
|
-16,382,515
|
|
|
|
-8,922
|
|
|
|
35,685,259
|
|
|
|
5,402,499
|
|
|
|
41,087,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
7,332,068
|
|
|
|
-1,074,598
|
|
|
|
0
|
|
|
|
6,257,470
|
|
|
|
0
|
|
|
|
6,257,470
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
23,933,987
|
|
|
|
-15,011,582
|
|
|
|
0
|
|
|
|
8,922,405
|
|
|
|
1,836,850
|
|
|
|
10,759,254
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
|
|
|
|
37,183
|
|
|
|
0
|
|
|
|
0
|
|
|
|
37,183
|
|
|
|
6,466
|
|
|
|
43,649
|
|
|
EQUITY
|
|
|
|
|
|
|
20,773,458
|
|
|
|
-296,334
|
|
|
|
-8,922
|
|
|
|
20,468,201
|
|
|
|
3,559,183
|
|
|
|
24,027,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
52,076,696
|
|
|
|
-16,382,515
|
|
|
|
-8,922
|
|
|
|
35,685,259
|
|
|
|
5,402,499
|
|
|
|
41,087,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Split-off of a portion of the shareholders’ equity of TMAR.
|
|
(2)
|
Loss of tax benefits following the split-off referenced in footnote (1).
|
VALUE OF TMAR SHARES, AS OF THE BASE DATE, AFTER GIVING EFFECT TO THE PREVIOUS STEPS OF THE CORPORATE
RESTRUCTURING
|
|
|
|
|
|
|
344,056,834 shares
|
|
|
VALUE PER SHARE
|
|
|
Book equity value *
|
|
R$
|
59.490756
|
|
|
Adjustment per share
|
|
R$
|
10.344755
|
|
|
Equity value adjusted at market price (1)
|
|
R$
|
69.835511
|
|
|
(1)
|
Adjusted to reflect the exclusion of treasury stock
|
7. APPRAISAL OF THE NET EQUITY AT MARKET PRICE OF COARI
This report uses the assets approach for the appraisal of the Net Equity at market price of COARI. In this approach, relevant assets and liabilities were
appraised so as to reflect their fair market value, according to the criteria detailed in Chapter 5
RELEVANT ASSETS
As a part of the Corporate Restructuring, COARI will be a subsidiary of TNL after the split-off described in the previous chapter. The relevant assets of
COARI are its investment in BRT.
FIXED ASSETS
Property that integrates the fixed assets relating to equipment accounts are of the utmost relevance among the set of BRT’s assets. Land and buildings are assets of secondary importance within the
telephony segment. Appraisal of these assets can be found in Attachment 2 hereof and in specific reports for the main real estate, and is summarized in the following table:
FIXED TELEPHONY’S FIXED ASSETS – REGION II
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
705,666,601.08
|
|
|
Transmission equipments
|
|
|
3,787,824,100.80
|
|
|
Work in progress
|
|
|
398,512,264.36
|
|
|
Infrastructure
|
|
|
2,622,685,901.28
|
|
|
Buildings
|
|
|
924,269,552.40
|
|
|
Other assets
|
|
|
286,792,110.19
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
8,725,750,530.11
|
|
|
|
|
|
|
|
MOBILE’S FIXED ASSETS – REGION II
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
259,300,159.23
|
|
|
Transmission equipments
|
|
|
1,028,946,323.56
|
|
|
Work in progress
|
|
|
150,088,047.46
|
|
|
Infrastructure
|
|
|
140,755,529.12
|
|
|
Buildings
|
|
|
425,402,887.50
|
|
|
Other assets
|
|
|
124,030,264.31
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
2,128,523,211.19
|
|
|
|
|
|
|
|
APPRAISAL OF OTHER ASSETS AND LIABILITIES
For other assets and liabilities of COARI, we adopted the criteria specified in Chapter 5, as shown on the calculation spreadsheets of Attachment 1.
VALUE OF THE NET EQUITY AT MARKET PRICE OF COARI
The table below shows the value of the Net Equity at Market Price of COARI, as of the base date, with respective adjustments previously described:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COARI PARTICIPAÇÕES S.A. (COARI)
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE
AS OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
SUBSEQUENT
EVENT
(2)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
|
|
938,789
|
|
|
|
0
|
|
|
|
0
|
|
|
|
938,789
|
|
|
|
0
|
|
|
|
938,789
|
|
|
- Cash and Cash Equivalents
|
|
|
|
|
195,229
|
|
|
|
740,221
|
|
|
|
0
|
|
|
|
935,450
|
|
|
|
0
|
|
|
|
935,450
|
|
|
Other Assets
|
|
|
|
|
740,221
|
|
|
|
-740,221
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
LONG TERM ASSETS
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
INVESTMENTS
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
- Investments in subsidiaries:
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
- Brasil Telecom S.A.
|
|
49.2829%
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
FIXED ASSETS
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
INTANGIBLE ASSETS
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
16,385,791
|
|
|
|
0
|
|
|
|
0
|
|
|
|
16,385,791
|
|
|
|
1,635,496
|
|
|
|
18,021,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
763
|
|
|
|
0
|
|
|
|
1,074,598
|
|
|
|
1,075,361
|
|
|
|
0
|
|
|
|
1,075,361
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
2,515
|
|
|
|
0
|
|
|
|
15,011,582
|
|
|
|
15,014,097
|
|
|
|
0
|
|
|
|
15,014,097
|
|
|
EQUITY
|
|
|
|
|
16,382,513
|
|
|
|
0
|
|
|
|
-16,086,180
|
|
|
|
296,333
|
|
|
|
1,635,496
|
|
|
|
1,931,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
16,385,791
|
|
|
|
0
|
|
|
|
0
|
|
|
|
16,385,791
|
|
|
|
1,635,496
|
|
|
|
18,021,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1)
|
Represents amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued in the Corporate Restructuring.
|
|
2)
|
Incorporation of the portion of the shareholders’ equity of TMAR which was split-off.
|
VALUE OF COARI SHARES, AS OF THE BASE DATE, AFTER GIVING EFFECT TO THE PREVIOUS STEPS OF THE CORPORATE
RESTRUCTURING
|
|
|
|
|
|
|
425,944 shares
|
|
|
VALUE PER SHARE
|
|
|
Book equity value *
|
|
R$
|
695.707992
|
|
|
Adjustment per share
|
|
R$
|
3,839.696399
|
|
|
Equity value adjusted at market price (1)
|
|
R$
|
4,535.404391
|
|
|
(1)
|
Adjusted to reflect the exclusion of treasury stock
|
8.
CONCLUSION
In the light of the analyses made of the previously mentioned documents, and on the basis of studies conducted by APSIS, the experts concluded that the rate of exchange of COARI shares for TMAR shares,
appraised for the values of their Net Equity at Market Prices, appraised, in turn, through the assets approach, as of June 30 2011, are:
|
|
|
0.015398 shares of COARI for 1 share of TMAR
|
Having concluded Report RJ-0375/11-05, which consists of 33 (thirty three) pages typed on one side and 4 (four)
attachments and reproduced in 3 (three) original counterparts, APSIS Consultoria Empresarial Ltda., CREA/RJ 82.2.00620-1 and CORECON/RJ RF/2.052-4, a company specializing in the appraisal of assets, legally represented by the signatories below,
makes itself available for any clarifications which may be necessary.
Rio de Janeiro, August 12, 2011.
|
|
|
|
|
Diretor
|
|
Gerente de Projetos
|
9. ATTACHMENTS
|
|
1.
|
VALUATION CALCULATIONS
|
|
|
2.
|
MACHINERY AND EQUIPMENT VALUATION
|
|
|
4.
|
APSIS GLOSSARY AND PROFILES
|
|
|
|
|
|
SÃO PAULO - SP
Av. Angélica, nº 2.503, Conj. 42
Consolação, CEP: 01227-200
Tel.: + 55 11 3666.8448 Fax: + 55 11 3662-5722
|
|
RIO DE JANEIRO - RJ
Rua da Assembleia, nº. 35, 12º andar
Centro, CEP: 20011-001
Tel.: + 55 21 2212.6850
Fax: + 55 21 2212.6851
|
ATTACHMENT 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TELEMAR NORTE LESTE S.A. (TMAR)
|
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
|
BALANCE AS
OF 06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
SUBSEQUENT
EVENT
(2)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
12,101,697
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,101,697
|
|
|
|
-522,282
|
|
|
|
11,579,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
|
|
|
|
|
4,825,689
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,825,689
|
|
|
|
0
|
|
|
|
4,825,689
|
|
|
Financial Applications
|
|
|
|
|
|
|
672,414
|
|
|
|
0
|
|
|
|
0
|
|
|
|
672,414
|
|
|
|
0
|
|
|
|
672,414
|
|
|
Receivable Accounts
|
|
|
|
|
|
|
3,926,657
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,926,657
|
|
|
|
0
|
|
|
|
3,926,657
|
|
|
Inventories
|
|
|
|
|
|
|
140,675
|
|
|
|
0
|
|
|
|
0
|
|
|
|
140,675
|
|
|
|
0
|
|
|
|
140,675
|
|
|
Deferred Taxes and Taxes Recoverable
|
|
|
|
352,359
|
|
|
|
0
|
|
|
|
0
|
|
|
|
352,359
|
|
|
|
0
|
|
|
|
352,359
|
|
|
Financial Instruments and Derivatives
|
|
|
|
|
|
|
55,862
|
|
|
|
0
|
|
|
|
0
|
|
|
|
55,862
|
|
|
|
0
|
|
|
|
55,862
|
|
|
Judicial and Blocked Deposits
|
|
|
|
|
|
|
439,260
|
|
|
|
0
|
|
|
|
0
|
|
|
|
439,260
|
|
|
|
0
|
|
|
|
439,260
|
|
|
Other Taxes
|
|
|
|
|
|
|
774,711
|
|
|
|
0
|
|
|
|
0
|
|
|
|
774,711
|
|
|
|
0
|
|
|
|
774,711
|
|
|
Other Assets
|
|
|
|
|
|
|
914,070
|
|
|
|
0
|
|
|
|
0
|
|
|
|
914,070
|
|
|
|
-522,282
|
|
|
|
391,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
39,974,999
|
|
|
|
-16,382,515
|
|
|
|
-8,922
|
|
|
|
23,583,562
|
|
|
|
5,924,780
|
|
|
|
29,508,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM ASSETS
|
|
|
|
|
|
|
6,958,119
|
|
|
|
0
|
|
|
|
-8,922
|
|
|
|
6,949,197
|
|
|
|
0
|
|
|
|
6,949,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Applications Measured at Fair Value
|
|
|
|
53,282
|
|
|
|
0
|
|
|
|
0
|
|
|
|
53,282
|
|
|
|
0
|
|
|
|
53,282
|
|
|
Deferred Taxes
|
|
|
|
|
|
|
2,754,579
|
|
|
|
0
|
|
|
|
-8,922
|
|
|
|
2,745,657
|
|
|
|
0
|
|
|
|
2,745,657
|
|
|
Financial Instruments and Derivatives
|
|
|
|
|
|
|
29,251
|
|
|
|
0
|
|
|
|
0
|
|
|
|
29,251
|
|
|
|
0
|
|
|
|
29,251
|
|
|
Judicial and Blocked Deposits
|
|
|
|
|
|
|
2,507,541
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,507,541
|
|
|
|
0
|
|
|
|
2,507,541
|
|
|
Other Taxes
|
|
|
|
|
|
|
328,430
|
|
|
|
0
|
|
|
|
0
|
|
|
|
328,430
|
|
|
|
0
|
|
|
|
328,430
|
|
|
Financial Assets Available for Sale
|
|
|
|
|
|
|
1,024,649
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,024,649
|
|
|
|
0
|
|
|
|
1,024,649
|
|
|
Other Assets
|
|
|
|
|
|
|
260,387
|
|
|
|
0
|
|
|
|
|
|
|
|
260,387
|
|
|
|
0
|
|
|
|
260,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERMANENT
|
|
|
|
|
|
|
33,016,880
|
|
|
|
-16,382,515
|
|
|
|
0
|
|
|
|
16,634,365
|
|
|
|
5,924,780
|
|
|
|
22,559,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
16,431,627
|
|
|
|
-16,382,515
|
|
|
|
0
|
|
|
|
49,112
|
|
|
|
0
|
|
|
|
49,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Investments in subsidiaries:
|
|
|
|
|
|
|
16,382,515
|
|
|
|
-16,382,515
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Coari Participações S.A.
|
|
|
100.00
|
%
|
|
|
16,382,515
|
|
|
|
-16,382,515
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Other Investments
|
|
|
|
|
|
|
49,112
|
|
|
|
0
|
|
|
|
0
|
|
|
|
49,112
|
|
|
|
0
|
|
|
|
49,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
|
|
|
|
14,305,484
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14,305,484
|
|
|
|
5,924,780
|
|
|
|
20,230,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Work in Progress
|
|
|
|
|
|
|
1,978,843
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,978,843
|
|
|
|
0
|
|
|
|
1,978,843
|
|
|
- Automatic Switching Equipment
|
|
|
|
|
|
|
1,480,971
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,480,971
|
|
|
|
1,037,971
|
|
|
|
2,518,942
|
|
|
- Transmission and Other Equipment
|
|
|
|
|
|
|
5,391,306
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,391,306
|
|
|
|
2,027,948
|
|
|
|
7,419,254
|
|
|
- Infrastructure
|
|
|
|
|
|
|
4,148,724
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,148,724
|
|
|
|
1,591,393
|
|
|
|
5,740,117
|
|
|
- Buildings
|
|
|
|
|
|
|
874,432
|
|
|
|
0
|
|
|
|
0
|
|
|
|
874,432
|
|
|
|
1,073,968
|
|
|
|
1,948,400
|
|
|
- Other Assets
|
|
|
|
|
|
|
431,208
|
|
|
|
0
|
|
|
|
0
|
|
|
|
431,208
|
|
|
|
193,500
|
|
|
|
624,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets
|
|
|
|
|
|
|
2,279,769
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,279,769
|
|
|
|
0
|
|
|
|
2,279,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Goodwill
|
|
|
|
|
|
|
73,901
|
|
|
|
0
|
|
|
|
0
|
|
|
|
73,901
|
|
|
|
0
|
|
|
|
73,901
|
|
|
- Data Processing System
|
|
|
|
|
|
|
647,154
|
|
|
|
0
|
|
|
|
0
|
|
|
|
647,154
|
|
|
|
0
|
|
|
|
647,154
|
|
|
- Brands and Patents
|
|
|
|
|
|
|
1,070
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,070
|
|
|
|
0
|
|
|
|
1,070
|
|
|
- Customer Portfolio
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Regulatory License
|
|
|
|
|
|
|
1,529,246
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,529,246
|
|
|
|
0
|
|
|
|
1,529,246
|
|
|
- Other Intangible Assets
|
|
|
|
|
|
|
28,398
|
|
|
|
0
|
|
|
|
0
|
|
|
|
28,398
|
|
|
|
0
|
|
|
|
28,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
52,076,696
|
|
|
|
-16,382,515
|
|
|
|
-8,922
|
|
|
|
35,685,259
|
|
|
|
5,402,499
|
|
|
|
41,087,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TELEMAR NORTE LESTE S.A. (TMAR)
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE AS
OF 06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
SUBSEQUENT
EVENT
(2)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT LIABILITIES
|
|
|
7,332,068
|
|
|
|
-1,074,598
|
|
|
|
0
|
|
|
|
6,257,470
|
|
|
|
0
|
|
|
|
6,257,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social and Worker Obligations
|
|
|
229,764
|
|
|
|
0
|
|
|
|
0
|
|
|
|
229,764
|
|
|
|
0
|
|
|
|
229,764
|
|
|
Suppliers
|
|
|
2,190,159
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,190,159
|
|
|
|
0
|
|
|
|
2,190,159
|
|
|
Fiscal Obligations
|
|
|
240,990
|
|
|
|
0
|
|
|
|
0
|
|
|
|
240,990
|
|
|
|
0
|
|
|
|
240,990
|
|
|
Loans and Financing
|
|
|
1,849,796
|
|
|
|
-1,074,598
|
|
|
|
0
|
|
|
|
775,198
|
|
|
|
0
|
|
|
|
775,198
|
|
|
Dividends and Interest Payable on Capital
|
|
|
105,775
|
|
|
|
0
|
|
|
|
0
|
|
|
|
105,775
|
|
|
|
0
|
|
|
|
105,775
|
|
|
Financial Instruments and Derivatives
|
|
|
736,707
|
|
|
|
0
|
|
|
|
0
|
|
|
|
736,707
|
|
|
|
0
|
|
|
|
736,707
|
|
|
Other Taxes
|
|
|
649,806
|
|
|
|
0
|
|
|
|
0
|
|
|
|
649,806
|
|
|
|
0
|
|
|
|
649,806
|
|
|
Refinancing Fiscal Program
|
|
|
46,653
|
|
|
|
0
|
|
|
|
0
|
|
|
|
46,653
|
|
|
|
0
|
|
|
|
46,653
|
|
|
Permits and Leasing Payble
|
|
|
274,588
|
|
|
|
0
|
|
|
|
0
|
|
|
|
274,588
|
|
|
|
0
|
|
|
|
274,588
|
|
|
Other Obligations
|
|
|
527,586
|
|
|
|
0
|
|
|
|
0
|
|
|
|
527,586
|
|
|
|
0
|
|
|
|
527,586
|
|
|
Provisions
|
|
|
480,244
|
|
|
|
0
|
|
|
|
0
|
|
|
|
480,244
|
|
|
|
0
|
|
|
|
480,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
23,933,987
|
|
|
|
-15,011,582
|
|
|
|
0
|
|
|
|
8,922,405
|
|
|
|
1,836,850
|
|
|
|
10,759,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
23,933,987
|
|
|
|
-15,011,582
|
|
|
|
0
|
|
|
|
8,922,405
|
|
|
|
1,836,850
|
|
|
|
10,759,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and Financing
|
|
|
16,757,685
|
|
|
|
-15,011,582
|
|
|
|
0
|
|
|
|
1,746,103
|
|
|
|
0
|
|
|
|
1,746,103
|
|
|
Related Party Liabilities
|
|
|
2,055,844
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,055,844
|
|
|
|
0
|
|
|
|
2,055,844
|
|
|
Financial Instruments and Derivatives
|
|
|
385,764
|
|
|
|
0
|
|
|
|
0
|
|
|
|
385,764
|
|
|
|
0
|
|
|
|
385,764
|
|
|
Permits and Leasing Payble
|
|
|
858,499
|
|
|
|
0
|
|
|
|
0
|
|
|
|
858,499
|
|
|
|
0
|
|
|
|
858,499
|
|
|
Refinancing Fiscal Program
|
|
|
566,141
|
|
|
|
0
|
|
|
|
0
|
|
|
|
566,141
|
|
|
|
0
|
|
|
|
566,141
|
|
|
Other Taxes
|
|
|
998,584
|
|
|
|
0
|
|
|
|
0
|
|
|
|
998,584
|
|
|
|
1,836,850
|
|
|
|
2,835,434
|
|
|
Other Obligations
|
|
|
322,373
|
|
|
|
0
|
|
|
|
0
|
|
|
|
322,373
|
|
|
|
0
|
|
|
|
322,373
|
|
|
Provisions
|
|
|
1,989,097
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,989,097
|
|
|
|
0
|
|
|
|
1,989,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
37,183
|
|
|
|
0
|
|
|
|
0
|
|
|
|
37,183
|
|
|
|
6,466
|
|
|
|
43,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
20,773,458
|
|
|
|
-296,334
|
|
|
|
-8,922
|
|
|
|
20,468,201
|
|
|
|
3,559,183
|
|
|
|
24,027,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
11,624,809
|
|
|
|
0
|
|
|
|
0
|
|
|
|
11,624,809
|
|
|
|
0
|
|
|
|
11,624,809
|
|
|
Capital Reserves
|
|
|
3,816,430
|
|
|
|
-1,253,207
|
|
|
|
0
|
|
|
|
2,563,223
|
|
|
|
0
|
|
|
|
2,563,223
|
|
|
Profit Reserves
|
|
|
6,272,487
|
|
|
|
0
|
|
|
|
0
|
|
|
|
6,272,487
|
|
|
|
0
|
|
|
|
6,272,487
|
|
|
Accumulated Profit or Loss
|
|
|
341,392
|
|
|
|
0
|
|
|
|
-8,922
|
|
|
|
332,470
|
|
|
|
0
|
|
|
|
332,470
|
|
|
Equity Valuation Adjustments
|
|
|
-1,281,660
|
|
|
|
956,872
|
|
|
|
0
|
|
|
|
-324,788
|
|
|
|
0
|
|
|
|
-324,788
|
|
|
Market Adjustments
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,559,183
|
|
|
|
3,559,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
52,076,696
|
|
|
|
-16,382,515
|
|
|
|
-8,922
|
|
|
|
35,685,259
|
|
|
|
5,402,499
|
|
|
|
41,087,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Split-off of a portion of the shareholders’ equity of TMAR.
|
|
(2)
|
Loss of tax benefits following the split-off referenced in footnote (1).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COARI PARTICIPAÇÕES S.A. (COARI)
|
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
|
BALANCE
AS
OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
SUBSEQUENT
EVENT
(2)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
938,789
|
|
|
|
0
|
|
|
|
0
|
|
|
|
938,789
|
|
|
|
0
|
|
|
|
938,789
|
|
|
Cash and Cash Equivalents
|
|
|
|
|
|
|
195,229
|
|
|
|
740,221
|
|
|
|
0
|
|
|
|
935,450
|
|
|
|
0
|
|
|
|
935,450
|
|
|
Other Assets
|
|
|
|
|
|
|
740,221
|
|
|
|
-740,221
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
LONG TERM ASSETS
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
PERMANENT
|
|
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
Investments
|
|
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
- Investments in subsidiaries:
|
|
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
- Brasil Telecom S.A.
|
|
|
49.2829
|
%
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,447,002
|
|
|
|
1,635,496
|
|
|
|
17,082,498
|
|
|
Fixed Assets
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Intangible Assets
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
16,385,791
|
|
|
|
0
|
|
|
|
0
|
|
|
|
16,385,791
|
|
|
|
1,635,496
|
|
|
|
18,021,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
763
|
|
|
|
0
|
|
|
|
1,074,598
|
|
|
|
1,075,361
|
|
|
|
0
|
|
|
|
1,075,361
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
2,515
|
|
|
|
0
|
|
|
|
15,011,582
|
|
|
|
15,014,097
|
|
|
|
0
|
|
|
|
15,014,097
|
|
|
LONG TERM LIABILITIES
|
|
|
|
|
|
|
2,515
|
|
|
|
0
|
|
|
|
15,011,582
|
|
|
|
15,014,097
|
|
|
|
0
|
|
|
|
15,014,097
|
|
|
EQUITY
|
|
|
|
|
|
|
16,382,513
|
|
|
|
0
|
|
|
|
-16,086,180
|
|
|
|
296,333
|
|
|
|
1,635,496
|
|
|
|
1,931,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
16,385,791
|
|
|
|
0
|
|
|
|
0
|
|
|
|
16,385,791
|
|
|
|
1,635,496
|
|
|
|
18,021,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1)
|
Represents amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued in the Corporate Restructuring.
|
|
2)
|
Incorporation of the portion of the shareholders’ equity of TMAR which was split-off.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASIL TELECOM S.A. (BRT)
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
|
|
|
BALANCE AS OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
7,162,456
|
|
|
|
-1,501,984
|
|
|
|
5,660,472
|
|
|
|
-105,381
|
|
|
|
5,555,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
|
|
|
|
|
1,803,213
|
|
|
|
-1,501,984
|
|
|
|
301,229
|
|
|
|
0
|
|
|
|
301,229
|
|
|
Financial Applications
|
|
|
|
|
|
|
791,218
|
|
|
|
0
|
|
|
|
791,218
|
|
|
|
0
|
|
|
|
791,218
|
|
|
Receivable Accounts
|
|
|
|
|
|
|
1,976,689
|
|
|
|
0
|
|
|
|
1,976,689
|
|
|
|
0
|
|
|
|
1,976,689
|
|
|
Inventories
|
|
|
|
|
|
|
18,727
|
|
|
|
0
|
|
|
|
18,727
|
|
|
|
0
|
|
|
|
18,727
|
|
|
Deferred Taxes and Taxes Recoverable
|
|
|
|
|
|
|
186,036
|
|
|
|
0
|
|
|
|
186,036
|
|
|
|
0
|
|
|
|
186,036
|
|
|
Instrumentos Financeiros e Derivativos
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Judicial and Blocked Deposits
|
|
|
|
|
|
|
1,470,051
|
|
|
|
0
|
|
|
|
1,470,051
|
|
|
|
0
|
|
|
|
1,470,051
|
|
|
Other Taxes
|
|
|
|
|
|
|
595,582
|
|
|
|
0
|
|
|
|
595,582
|
|
|
|
0
|
|
|
|
595,582
|
|
|
Other Assets
|
|
|
|
|
|
|
320,940
|
|
|
|
0
|
|
|
|
320,940
|
|
|
|
-105,381
|
|
|
|
215,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
18,837,201
|
|
|
|
0
|
|
|
|
18,837,201
|
|
|
|
5,108,535
|
|
|
|
23,945,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM ASSETS
|
|
|
|
|
|
|
12,205,796
|
|
|
|
0
|
|
|
|
12,205,796
|
|
|
|
0
|
|
|
|
12,205,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Applications Measured at Fair Value
|
|
|
|
|
|
|
12,715
|
|
|
|
0
|
|
|
|
12,715
|
|
|
|
0
|
|
|
|
12,715
|
|
|
Deferred Taxes
|
|
|
|
|
|
|
5,215,755
|
|
|
|
0
|
|
|
|
5,215,755
|
|
|
|
0
|
|
|
|
5,215,755
|
|
|
Credits with Related Parties
|
|
|
|
|
|
|
2,055,844
|
|
|
|
0
|
|
|
|
2,055,844
|
|
|
|
0
|
|
|
|
2,055,844
|
|
|
Judicial and Blocked Deposits
|
|
|
|
|
|
|
4,606,516
|
|
|
|
0
|
|
|
|
4,606,516
|
|
|
|
0
|
|
|
|
4,606,516
|
|
|
Other Taxes
|
|
|
|
|
|
|
171,625
|
|
|
|
0
|
|
|
|
171,625
|
|
|
|
0
|
|
|
|
171,625
|
|
|
Related Assets to Pension Funds
|
|
|
|
|
|
|
98,786
|
|
|
|
0
|
|
|
|
98,786
|
|
|
|
0
|
|
|
|
98,786
|
|
|
Other Assets
|
|
|
|
|
|
|
44,555
|
|
|
|
0
|
|
|
|
44,555
|
|
|
|
0
|
|
|
|
44,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERMANENT
|
|
|
|
|
|
|
6,631,405
|
|
|
|
0
|
|
|
|
6,631,405
|
|
|
|
5,108,535
|
|
|
|
11,739,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
8,265
|
|
|
|
0
|
|
|
|
8,265
|
|
|
|
0
|
|
|
|
8,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Investments in Subsidiaries:
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
0.0000
|
%
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Other Investments
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
|
|
|
|
5,435,464
|
|
|
|
0
|
|
|
|
5,435,464
|
|
|
|
5,108,535
|
|
|
|
10,543,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Work in Progress
|
|
|
|
|
|
|
752,668
|
|
|
|
0
|
|
|
|
752,668
|
|
|
|
0
|
|
|
|
752,668
|
|
|
- Automatic Switching Equipment
|
|
|
|
|
|
|
332,706
|
|
|
|
0
|
|
|
|
332,706
|
|
|
|
532,497
|
|
|
|
865,203
|
|
|
- Transmission and Other Equipment
|
|
|
|
|
|
|
2,606,674
|
|
|
|
0
|
|
|
|
2,606,674
|
|
|
|
1,786,151
|
|
|
|
4,392,825
|
|
|
- Infrastructure
|
|
|
|
|
|
|
996,149
|
|
|
|
0
|
|
|
|
996,149
|
|
|
|
1,620,654
|
|
|
|
2,616,803
|
|
|
- Buildings
|
|
|
|
|
|
|
416,005
|
|
|
|
0
|
|
|
|
416,005
|
|
|
|
1,019,219
|
|
|
|
1,435,224
|
|
|
- Other Assets
|
|
|
|
|
|
|
331,262
|
|
|
|
0
|
|
|
|
331,262
|
|
|
|
150,014
|
|
|
|
481,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets
|
|
|
|
|
|
|
1,187,676
|
|
|
|
0
|
|
|
|
1,187,676
|
|
|
|
0
|
|
|
|
1,187,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Goodwill
|
|
|
|
|
|
|
80,494
|
|
|
|
0
|
|
|
|
80,494
|
|
|
|
0
|
|
|
|
80,494
|
|
|
- Data Processing System
|
|
|
|
|
|
|
357,616
|
|
|
|
0
|
|
|
|
357,616
|
|
|
|
0
|
|
|
|
357,616
|
|
|
- Brands and Patents
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Regulatory Licenses
|
|
|
|
|
|
|
600,014
|
|
|
|
0
|
|
|
|
600,014
|
|
|
|
0
|
|
|
|
600,014
|
|
|
- Intangible Assets in Formation
|
|
|
|
|
|
|
146,705
|
|
|
|
0
|
|
|
|
146,705
|
|
|
|
0
|
|
|
|
146,705
|
|
|
- Other Intangible Assets
|
|
|
|
|
|
|
2,847
|
|
|
|
0
|
|
|
|
2,847
|
|
|
|
0
|
|
|
|
2,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
25,999,657
|
|
|
|
-1,501,984
|
|
|
|
24,497,673
|
|
|
|
5,003,154
|
|
|
|
29,500,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASIL TELECOM S.A. (BRT)
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE AS
OF 06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED BALANCE
|
|
|
CURRENT LIABILITIES
|
|
|
7,427,880
|
|
|
|
-1,501,984
|
|
|
|
5,925,896
|
|
|
|
0
|
|
|
|
5,925,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social and Worker Obligations
|
|
|
119,433
|
|
|
|
0
|
|
|
|
119,433
|
|
|
|
0
|
|
|
|
119,433
|
|
|
Suppliers
|
|
|
1,473,807
|
|
|
|
0
|
|
|
|
1,473,807
|
|
|
|
0
|
|
|
|
1,473,807
|
|
|
Fiscal Obligations
|
|
|
96,854
|
|
|
|
0
|
|
|
|
96,854
|
|
|
|
0
|
|
|
|
96,854
|
|
|
Loans and Financing
|
|
|
1,039,312
|
|
|
|
0
|
|
|
|
1,039,312
|
|
|
|
0
|
|
|
|
1,039,312
|
|
|
Dividends and Interest Payable on Capital
|
|
|
56,528
|
|
|
|
0
|
|
|
|
56,528
|
|
|
|
0
|
|
|
|
56,528
|
|
|
Instrumentos Financeiros e Derivativos
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Taxes
|
|
|
1,159,832
|
|
|
|
0
|
|
|
|
1,159,832
|
|
|
|
0
|
|
|
|
1,159,832
|
|
|
Refinancing Fiscal Program
|
|
|
37,778
|
|
|
|
0
|
|
|
|
37,778
|
|
|
|
0
|
|
|
|
37,778
|
|
|
Permits and Leasing Payable
|
|
|
115,291
|
|
|
|
0
|
|
|
|
115,291
|
|
|
|
0
|
|
|
|
115,291
|
|
|
Other Obligations
|
|
|
2,015,023
|
|
|
|
-1,501,984
|
|
|
|
513,039
|
|
|
|
0
|
|
|
|
513,039
|
|
|
Provisions
|
|
|
1,314,022
|
|
|
|
0
|
|
|
|
1,314,022
|
|
|
|
0
|
|
|
|
1,314,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
8,269,903
|
|
|
|
0
|
|
|
|
8,269,903
|
|
|
|
1,701,072
|
|
|
|
9,970,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
8,269,903
|
|
|
|
0
|
|
|
|
8,269,903
|
|
|
|
1,701,072
|
|
|
|
9,970,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and Financing
|
|
|
2,684,864
|
|
|
|
0
|
|
|
|
2,684,864
|
|
|
|
0
|
|
|
|
2,684,864
|
|
|
Permits and Leasing Payable
|
|
|
517,938
|
|
|
|
0
|
|
|
|
517,938
|
|
|
|
0
|
|
|
|
517,938
|
|
|
Refinancing Fiscal Program
|
|
|
413,055
|
|
|
|
0
|
|
|
|
413,055
|
|
|
|
0
|
|
|
|
413,055
|
|
|
Other Taxes
|
|
|
555,934
|
|
|
|
0
|
|
|
|
555,934
|
|
|
|
1,701,072
|
|
|
|
2,257,006
|
|
|
Other Obligations
|
|
|
342,083
|
|
|
|
0
|
|
|
|
342,083
|
|
|
|
0
|
|
|
|
342,083
|
|
|
Provisions
|
|
|
3,756,029
|
|
|
|
0
|
|
|
|
3,756,029
|
|
|
|
0
|
|
|
|
3,756,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
303
|
|
|
|
0
|
|
|
|
303
|
|
|
|
97
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
10,301,571
|
|
|
|
0
|
|
|
|
10,301,571
|
|
|
|
3,301,985
|
|
|
|
13,603,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
3,731,059
|
|
|
|
1,501,984
|
|
|
|
5,233,043
|
|
|
|
0
|
|
|
|
5,233,043
|
|
|
Capital Reserves
|
|
|
4,217,934
|
|
|
|
-1,501,984
|
|
|
|
2,715,950
|
|
|
|
0
|
|
|
|
2,715,950
|
|
|
Profit Reserves
|
|
|
1,885,511
|
|
|
|
0
|
|
|
|
1,885,511
|
|
|
|
0
|
|
|
|
1,885,511
|
|
|
Accumulated Profit or Loss
|
|
|
467,067
|
|
|
|
0
|
|
|
|
467,067
|
|
|
|
0
|
|
|
|
467,067
|
|
|
Ajustes de Avaliação Patrimonial
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Market Adjustments
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,301,985
|
|
|
|
3,301,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
25,999,657
|
|
|
|
-1,501,984
|
|
|
|
24,497,673
|
|
|
|
5,003,154
|
|
|
|
29,500,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued in the Corporate Restructuring.
|
ATTACHMENT 2
MACHINERY AND EQUIPMENT VALUATION
The technical procedures used in this Report are in
accordance with the criteria set forth by Appraisal Standards NBR 14653-1:2001 and NBR 14653-2:2004 of ABNT – Brazilian Association of Technical Standards, and appraisal calculations for assessing values were devised on the basis of the direct
market data comparative method and the replacement cost method.
Based on prior experiences, APSIS developed a method for assessing values
based on comparative elements drawn out of appraised operational systems.
Below find the references used towards the performance of our work
and the criteria used for the main items of the appraisal:
REFERENCES
|
a)
|
Equity Control of fixed assets, supplied by BrT to all the group’s companies;
|
|
b)
|
Quotations for the relevant equipment in each functional class;
|
|
c)
|
Analysis of BrT’s new operational projects for the purpose of harmonizing concepts and premises (APSIS Engineering and BrT Engineering);
|
|
d)
|
Data supplied by managers of several central offices during technical visitations, and;
|
|
e)
|
Appraisal of specific features of each facility.
|
METHODOLOGY
For the assessment of machinery
and equipment, we used as supporting documentation, the appraisal report performed by APSIS in September 2009 (date of value), where at the time held the market assessment and determining the useful life of the entire database of assets companies
valued according to the character of relevance. The final values found in September 2009 have been depreciated to the date of June 30, 2011, and market adjustments were calculated from this results.
The method used consists of achieving the value of new, equal or similar machines and/or equipment through market research done with manufacturers,
suppliers and/or representatives, in addition to, as the case may be, assembly, installation and transportation expenses.
We adopted a
simplified model by virtue of the size of the data base analyzed (1,938 thousand items), which consisted in grouping assets per operating functional unit.
After connecting all items to functional units, we adopted the following appraisal criteria/premises:
For all equipment deemed obsolete, with no market value, MODERN EQUIVALENT value will be contemplated.
The functional classes devised by APSIS defined technology used per demand, and not per manufacturer or model, seeing that, with regards to the market,
technology is within the reach of all, and values are similar among manufacturers.
The relevant equipment was selected per functional class
to be quoted with manufacturers, or the equivalent, comprised in the very data bank supplied, with purchase date being 2008.
A correction
factor was used for each functional class per sampling, with reference to the relevant equipment quoted being used and adopting the premise that the value of all equipment belonging to the same functional class is affected in the same manner.
The economic useful life of fixed assets installed on the plant was defined as per field visitations and data collected from the
manufacturers themselves. We contemplated the following factors for assessing economic useful life: the need of replacement due to technological advances per demand, competition, market trends and the very useful life of the equipment.
Therefore, we arrived at the following probable estimates, per engineering group:
|
|
|
|
|
- Commutation => 10 years
- Transmission => 10 years
- Infrastructure => 20 years, with towers being = 25 years
- Access Network => 10 years
- Termination => 10 years
|
|
|
Some non-relevant functional classes were identified and therefore associated to other classes alike,
namely:
CRITERIA FOR REPLACEMENT VALUE ASSESSMENT– NON-RELEVANT CLASSES
|
|
|
|
|
CLASSES
|
|
CLASS AVERAGE
|
|
|
|
|
CAB, C-B, C-O
|
|
C-CG, C-M, C-P
|
|
|
|
|
CEL-, CEL-A
|
|
CEL-B
|
|
|
|
|
D-DEL, D-E
|
|
D-DO
|
|
|
|
|
SAT-A, SAT-E
|
|
D-DO, D-DEL, D-MO, D-MUL, D-RO
|
|
|
|
|
E-B, E-T
|
|
E-A, E-G, E-R
|
|
|
|
|
F-I, S-A
|
|
C-G, C-M, C-P, T-A, T-ANA, T-DEL, T-DO
|
|
|
|
|
T-E, T-O
|
|
T-A, T-ANA, T-DEL, T-DO
|
|
|
|
|
TE-CP, TE-O, TE-VC, TE-WLL, TE-DA, TE-DEL
|
|
TE-AS, TE-TP
|
The current value of each equipment was achieved by contemplating replacement value depreciation on the basis of new
economic useful life from the date of purchase.
With regards to installations, the same were assessed as an integrating part of their
respective equipment.
ATTACHMENT 3
REAL ESTATE VALUATION
The technical procedures used in the report prepared by APSIS are in accordance with the criteria set forth by
Appraisal Standards NBR 14653-1:2001 and NBR 14653-2:2004 of ABNT - Brazilian Association
of Technical Standards
, and appraisal calculations to assess market values were prepared on the basis of the evolutive method (direct market data comparative method for land, and cost quantification method for buildings and improvements) and on
the basis of the direct market data comparative method.
Furthermore, the reports comply with the specifications and criteria set forth by
Appraisal Standards NBR 14653-1:2001, NBR 14653-2:2004 and NBR 14653-5:2004 of ABNT - Brazilian Association of Technical Standards and with the specifications and criteria set forth by USPAP (Uniform Standards of Professional Appraisal Practice), in
addition to requirements imposed by different bodies, such as: the Ministry of Treasury, Central Bank, Bank of Brazil, CVM (Brazilian equivalent of the Securities and Exchange Commission), SUSEP (Superintendence of Private Insurance), RIR/99 (Income
Tax Regulation/99), etc. The postulates comprised in the Professional Codes of Ethics set forth by CONFEA - Federal Council of Engineering, Architecture and Agronomy and by the Institute of Legal Engineering have also been complied with.
1. METHODOLOGY FOR REAL ESTATE APPRAISAL
The methodology used in the reports is described as follows.
1.1 ASSESSMENT OF THE REAL
ESTATE’S VALUE - EVOLUTIVE METHOD
This method defines the total value of the real estate on the basis of a combination between the direct
comparative method for assessing the value of land and the cost of reproduction method for assessing the value of improvements.
DIRECT
COMPARATIVE METHOD (Handling by Factors) - LAND
DEFINITION
This method defines land value by comparing market data from similar land. Firstly, market research is carried out aiming at producing a representative sampling of market data on land with features,
inasmuch as possible, similar to that under appraisal through the use of all available data. This stage, which involves research structures and strategies, starts with the profiling and outlining of the market under analysis upon the assistance of
existing theories and concepts or hypotheses originated from experiences acquired by the appraiser on value formation. Within research structure, variables are chosen which, in principle, are relevant for explaining value formation, and presumed
relations between them and dependent variables have been established. Researched items are then submitted to technical unification through the assistance of approved empirical weighting factors, which aim at weighting the features and qualities of
the data researched.
IDENTIFICATION OF THE SAMPLE’S VARIABLES
Dependent variables
In order to correctly specify dependent variables, market investigation in
connection to their behavior and to ways in which prices are expressed (for instance, total or unit price, reference currency, payment forms) is required, as well as observation of measurement unit unification.
Independent variables
Independent variables
refer to physical features (for instance, area, façade), location features (such as district, street, avenue, distance to pole of influence, among others), and economic features (such as bid or transaction, business period and condition - in
cash or in installments). They must be chosen on the basis of existing theories, knowledge acquired, common sense and other features which have revealed themselves important during performance of our work, as some variables contemplated during
research planning may have revealed themselves to be of little relevance or vice-versa. Whenever possible, adoption of quantitative variables is recommended.
UNIFICATION FACTORS NORMALLY USED IN THE REPORTS
According to Appraisal Standard NBR 14653-2:2004
of ABNT, for foundation level I to be attained, the adjustment interval acceptable for each factor or set of factors is 0,50 to 1,50. The following factors were used in this appraisal:
F1 - Bid Factor
This factor has been adopted for items under bid, bearing in mind that it normally suffers a value reduction for the purpose of closing the deal. It varies from 0,8 to 1,0.
F2 - Transposition Factor
It has been adopted
for the purpose of unifying researched items with the real estate under appraisal, in function of the relative location thereof.
F3 - Area
Factor
It has been adopted for the purpose of unifying researched items with the real estate under appraisal, in function of the relative
area thereof.
ü
F3 = (s/S)
1/4
Where: s = area of researched item
S= area of real estate under appraisal
When variation between two areas is less
than 30%; or
ü
F3 = (s/S)
1/8
When variation between two areas is over 30%.
F4 - Topography Factor
It has been adopted to
unify researched items with the real estate under appraisal in function of the relative topography thereof.
F5 - Frontage Factor
It has been adopted to unify researched items with the real estate under appraisal, in function of the relative frontage thereof.
ü
F5 =
(TA/Ta)
1/4
Where: TA = frontage of the real estate under appraisal
Ta = frontage of the researched item
With expression being limited to the interval of 0,5 <= TA/Ta >= 2,0
After unification,
these values are subject to a statistical treatment for assessment of the unit value to be adopted for the real estate under appraisal.
After
researched items have been duly unified, Student’s Percentile-T Method is adopted for assessing the arbitration field with 80% confidence. Within this interval, the appraiser, at his discretion, adopts the unit value deemed appropriate. This
value is multiplied by the constructed area of the real estate under appraisal, with the value thereof thus being arrived at.
COST
QUANTIFICATION METHOD - BUILDINGS AND IMPROVEMENTS
The cost quantification method determines value on the basis of the cost of reproduction
minus depreciation of buildings and improvements, with all original features or re-allocation thereof being observed, and depreciation due to physical deterioration, functionality and economic/external obsolescence being contemplated.
The unit value (new value) for buildings and construction is defined through the adoption of the basic unit
cost of construction, which is determined by inquiries made to specialized magazines on civil construction indexes and costs (PINI EDITORS). This value is multiplied by the equivalent construction area thereof.
A percentage relative to factors not included in the cost of construction, such as: BDI (Indirect Costs and Profits) rate, project cost, fees, etc., is
added to this sum, with the building’s cost of production minus depreciation being thus established.
Depreciation results from the
items’ wear and tear. Functional obsolescence occurs in function of a decrease in value based on the internal condition of the real estate, produced by inadequate design, materials, or processes, which give rise to inadequacies, capability,
cancellation or exceeding operational costs.
Economic/external obsolescence is an irreparable injury to the value of buildings and
improvements, caused by unfavorable conditions of the local economy and industrial sector, such as: unavailability of funding, loss of sources of raw material and manpower, lack of efficient transportation, change of trade center, change in
legislation and change in customs.
A depreciation factor set forth by the
Ross-Heidecke Method
(in function of the state of
conservation and apparent age of the building) is applied to the prior achieved cost of reproduction of the building, with the building’s cost of reproduction minus depreciation being thus arrived at.
CALCULATION OF THE REAL ESTATE’S FINAL VALUE
The market value for the purchase and sale of the real estate will be achieved through the sum of land, construction and improvement quotas. If the resulting value is not appropriate to the status of the
real estate market of the region within the segment under analysis, a trade factor has been adopted.
1.2 DIRECT COMPARATIVE METHOD (Handling
by Factors)
DEFINITION
This method
defines land value by comparing market data from similar land. Firstly, market research is carried out aiming at producing a representative sampling of market data on real estate with features, inasmuch as possible, similar to that under appraisal
through the use of all available evidence. This stage, which involves research structures and strategies, starts with the profiling and outlining of the market under analysis upon the assistance of existing theories and concepts or hypotheses
originated from experiences acquired by the appraiser on value formation. Within research structure, variables are chosen which, in principle, are relevant for explaining value formation, and presumed relations between them and dependent variables
have been established. Researched items are then submitted to technical unification through the assistance of approved empirical weighting factors, which aim at weighting the features and qualities of the data researched.
IDENTIFICATION OF THE SAMPLE’S VARIABLES
Dependent variables
In order to correctly specify dependent variables, market investigation in
connection to their behavior and to ways in which prices are expressed (for instance, total or unit price, reference currency, payment forms) is required, as well as observation of measurement unit unification.
Independent variables
Independent variables
refer to physical features (for instance, area, façade), location features (such as district, street, avenue, distance to pole of influence, among others), and economic features (such as bid or transaction, business period and condition - in
cash or in installments). They must be chosen on the basis of existing theories, knowledge acquired, common sense and other features which have revealed themselves important during performance of our work, as some variables contemplated during
research planning may have revealed themselves to be of little relevance or vice-versa. Whenever possible, adoption of quantitative variables is recommended.
UNIFICATION FACTORS NORMALLY USED IN THE REPORTS
According to Appraisal Standard NBR 14653-2:2004 of ABNT, for foundation level I to be attained, the adjustment interval acceptable for each factor or set of factors is 0,50 to 1,50. The following factors
were used in this appraisal:
F1 - Bid Factor
This factor has been adopted for items under bid, bearing in mind that it normally suffers a value reduction for the purpose of closing the deal. It varies from 0,8 to 1,0.
F2 - Transposition Factor
It has been adopted
for the purpose of unifying researched items with the real estate under appraisal, in function of the relative location thereof.
F3 - Area
Factor
It has been adopted for the purpose of unifying researched items with the real estate under appraisal, in function of the relative
area thereof.
|
|
|
F3 = (s/S)
1/4
when
variation between two areas is less than 30%; or
F3 =
(s/S)
1/8
when variation between two areas is over 30%; Where:
s
= area of researched item
S
= area of real estate under appraisal
|
F4 - Age Factor
It has been adopted to unify researched items with the real estate under appraisal, in function of the relative age thereof.
F5 - Construction Pattern Factor
It has been adopted to unify researched items with the real
estate under appraisal, in function of the construction pattern thereof.
After being unified, these values are subject to a statistical
treatment for assessment of the unit value to be adopted for the real estate under appraisal.
After researched items have been duly unified,
Student’s Percentile-T Method is adopted for assessing the arbitration field with 80% confidence. Within this interval, the appraiser, at his discretion, adopts the unit value deemed appropriate. This value is multiplied by the constructed area
of the real estate under appraisal, with the value thereof thus being arrived at.
ATTACHMENT 4
ABL - Gross Leasable Area
ABNT - Brazilian Technical Standards Association
Allocated Codes - serial number (grades or
weights) to differentiate the quality features of properties.
Allotment - subdivision of a tract of land into lots for buildings with the
opening of new thoroughfares, or the extension, modification or expansion of existing ones.
Amortization - systematic allocation of the
depreciable value of an asset over its useful life.
Apparent Age - estimated age of a property according to its characteristics and
conservation status at the time of inspection.
Asset - a resource controlled by the entity as a result of past events from which future
economic benefits are expected for the entity.
Asset Approach - valuation of companies where all assets (including those not accounted for)
have their values adjusted to the market. Also known as market net equity.
Base Date - specific date (day, month and year) of application of
the assessment value.
Basic Infrastructure - urban rainwater drainage equipment, street lighting, sewage system, drinking water, public and
home electricity supply and access routes.
BDI - a percentage that indicates the benefits and overhead costs applied to the direct cost of
construction.
Best Use of the Property - the most economically appropriate use of a certain property according to its characteristics and
surroundings, respecting legal limitations.
Beta - a systematic risk measure of a share; price trend of a particular share to be correlated with
changes in a given index.
Book Value - the value at which an asset or liability is recognized on the balance sheet.
Building Standard - the quality of the improvements according to the specifications of design, materials, workmanship and performance effectively used in
construction.
Business Combination - union of separate entities or businesses producing financial statements of a single reporting entity.
Transaction or other event by which an acquirer obtains control of one or more businesses, regardless of the legal form of operation.
Business Risk - uncertainty of realization of expected future returns of the business resulting from factors other than financial leverage.
CAPEX (Capital Expenditure) - fixed asset investments.
Capitalization - conversion of a simple period of economic benefits into value.
CAPM (Capital
Asset Pricing Model) - model in which the capital cost for any share or lot of shares equals the risk free rate plus risk premium provided by the systematic risk of the share or lot of shares under investigation. Generally used to calculate the Cost
of Equity or the Cost of Shareholder Capital.
Capitalization Rate - any divisor used to convert economic benefits into value in a single
period.
Capital Structure - composition of a company’s invested capital, between own capital (equity) and third-party capital (debt).
Cash Flow - cash generated by an asset, group of assets or business during a given period of time. Usually the term is supplemented by a
qualification referring to the context (operating, non-operating, etc...).
Cash Flow on Invested Capital - cash flow generated by the company to be reverted to lenders (interest and
amortizations) and shareholders (dividends) after consideration of cost and operating expenses and capital investments.
Cash-Generating Unit
- smallest identifiable group of assets generating cash inflows that are largely independent on inputs generated by other assets or groups of assets.
Casualty - an event that causes financial loss.
Company - commercial or industrial entity,
service provider or investment entity holding economic activities.
Conservation Status - physical status of an asset in result of its
maintenance.
Control - power to direct the strategic policy and administrative management of a company.
Control Premium - value or percentage of the pro-rata value of a lot of controlling shares over the pro-rata value of non-controlling shares, which
reflect the control power.
Cost - the total direct and indirect costs necessary for production, maintenance or acquisition of an asset at a
particular time and situation.
Cost of Capital - Expected rate of return required by the market as an attraction to certain investment funds.
CPC - Accounting Pronouncements Committee.
Current Value - value replacement with a new value depreciated as a result of the physical state the property is in.
CVM - Securities and Exchange Commission.
Damage - damage caused to others by the occurrence of flaws, defects, accidents and crimes, among others.
Data Treatment - application of operations to express, in relative terms, the attribute differences between the market data and data of the property being assessed.
Date of Issue - closing date of the valuation report, when conclusions are conveyed to the client.
DCF (Discounted Cash Flow) - discounted cash flow.
D & A - depreciation and amortization.
Dependent Variable - variable to be explained by the
independent ones.
Depreciable Value - cost of the asset, or other amount that substitutes such cost (financial statements), less its residual
value
Depreciation - systematic allocation of the depreciable value of an asset during its useful life.
Dichotomous Variable - variable that assumes only two values.
Direct Production Cost - spending on inputs, including labor, in the production of goods.
Discount for Lack of Control - value or percentage deducted from the pro-rata value of 100% of the value of a company that reflects the absence of part
or all of the control.
Discount for Lack of Liquidity - value or percentage deducted from the pro-rata value of 100% of the value
of a company that reflects the lack of liquidity.
Discount Rate - any divisor used to convert a flow of future economic benefits into present
value.
Drivers - value drivers or key variables.
EBIT (Earnings before Interest and Taxes) - earnings before interest and taxes.
EBITDA (Earnings
before Interest, Taxes, Depreciation and Amortization) - earnings before interest, taxes, depreciation and amortization.
Economic Benefits -
benefits such as revenue, net profit, net cash flow, etc.
Efficient Use - that which is recommendable and technically possible for the
location on a reference date, among the various uses permitted by the applicable law, observing surrounding marketing trends.
Electrical
Damage Value - estimated cost of the repair or replacement of parts, when the property suffers electrical damage. Values are tabulated in percentages of the Replacement Value and have been calculated through the study of equipment manuals and the
expertise in corrective maintenance of Apsis technicians.
Enterprise - set of properties capable of producing revenue through marketing or
economic exploitation. It can be: real estate (e.g. subdivision, commercial / residential buildings), real-estate based (e.g., hotel, shopping mall, theme parks), industrial or rural.
Enterprise Value - economic value of the company.
Equity Value - economic value of the equity.
Equivalent Construction Area - constructed area on which the unit cost equivalence of corresponding construction is applied, according to
ABNT postulates.
Equivalent Depth - numerical result of the division of a lot area by its main projected front.
Expertise - technical activity performed by a professional with specific expertise to investigate and clarify facts, check the status of property,
investigate the causes that motivated a particular event, appraise assets, their costs, results or rights.
Facilities - set of materials,
systems, networks, equipment and operational support services for a single machine, production line or plant, according to the degree of aggregation.
Fair Market Value - value at which an asset could have its ownership exchanged between a potential seller and a potential buyer, when both parties have reasonable knowledge of relevant facts and neither
is under pressure to do so.
Fair Value Less Cost to Sell - value that can be obtained from the sale of an asset or cash-generating unit less
sale expenses, in a transaction between knowledgeable, willing and uninterested parties.
FCFF (Free Cash Flow to Firm) - Free cash flow to
firm, or unlevered free cash flow.
Financial Lease - that which substantially transfers all the risks and benefits related to the ownership
of the asset, which may or may not eventually be transferred. Leases that are not financial leases are classified as operating leases.
Fixed
Asset - tangible asset available for use in the production or supply of goods or services, in third-party leasing, investments, or for management purposes, expected to be used for more than one accounting period.
Flaw - anomaly that affects the performance of products and services, or makes them inadequate to the purposes intended, causing inconvenience or
material loss to the consumer.
Forced Liquidation - condition on the possibility of a compulsory sale or in a shorter period than the
average absorption by the market.
Free Float - percentage of outstanding shares on the company’s total capital.
Frontage - horizontal projection of the line dividing the property and the access road; measurement of the front of a building.
Goodwill - see Goodwill based on the expectation of future profitability (goodwill).
Homogenization - treatment of observed prices by application of mathematical transformations that express, in relative terms, the differences between market data attributes and those of the property
assessed.
Homogenized Area - useful or private area, or built with mathematical treatments for valuation purposes, according to criteria
based on the real estate market.
IAS (International Accounting Standards) - International Accounting Standards.
IASB (International Accounting Standards Board) - International Accounting Standards Board.
Ideal Fraction - percentage owned by each of the buyers (tenants) of the land and of the building’s common items.
IFRS (International Financial Reporting Standards) - International Financial Reporting Standards, a set of international accounting pronouncements published and reviewed by the IASB.
Impairment - see Losses on devaluation
Impairment Losses (impairment) - book value of the asset that exceeds, in the case of
stocks, its selling price less the cost to complete it and expense of selling it; or, in the case of other assets, their fair value less expenditure for sale.
Income Approach - valuation method for converting the present value of expected economic benefits.
Independent Variables - variables that provide a logical content to the formation of the value of the property subject to the assessment.
Indirect Production Cost - administrative and financial costs, benefits and other liens and charges necessary for the production of goods.
Influence Point - atypical point that, when removed from the sample, significantly changes the estimated parameters or the linear structure of the model.
Insurance - risk transfer guaranteed by contract whereby one party undertakes, subject to payment of premium, to indemnify another for the
occurrence of casualties covered under the policy.
Insurance Value - value at which an insurance company assumes the risks, and does not
apply to the land and foundations, except in special cases.
Intangible Asset - identifiable non-monetary asset without physical substance.
This asset is identifiable when: it is separable, i.e., capable of being separated or divided from the entity and sold, transferred, licensed, leased or exchanged, either alone or together with the related contract, asset or liability; or originates
from contractual rights or other legal rights regardless of their being transferred, separable from the entity or from other rights and obligations.
Internal Rate of Return - discount rate where the present value of future cash flow is equivalent to the cost of investment.
International Accounting Standards - standards and interpretations adopted by the IASB. They include:
International Financial Reporting Standards (IFRS) International Accounting Standards (IAS) and interpretations developed by the Interpretation Committee on International Financial Reporting Standards (IFRIC) or by the former Standing
Interpretations Committee (SIC).
Invested Capital - the sum of own capital and third-party capital invested in a company. Third-party capital
is usually related to debt with interest (short and long-term) and must be specified within the context of the valuation.
Investment Property
- property (land, building or building part, or both) held by the owner or lessee under the lease, both to receive payment of rent and for capital appreciation or both, other than for: use in the production or supply of goods or services, as well as
for administrative purposes.
Investment Value - value for a particular investor based on individual interests in the property in question. In
the case of business valuation, this value can be analyzed by different situations, such as the synergy with other companies of an investor, risk perceptions, future performance and tax planning.
Key Money - amount paid by the prospective tenant for signature or transfer of the lease contract, as compensation for the point of sale.
Key Variables - variables that, a priori, and traditionally have been important for the formation of property value.
Levered Beta - beta value reflecting the debt in capital structure.
Liability - present obligation that arises from past events, whereby it is hoped that the settlement thereof will result in the inflow of funds from the entity embodying economic benefits.
Liquidation Value - value of a property offered for sale on the market outside the normal process, i.e. one that would be established if the property
were offered for sale separately, taking into account the costs involved and the discount required for a sale in a reduced period.
Liquidity
- ability to rapidly convert certain assets into cash or into the payment of a certain debt.
Market Approach - valuation method in which
multiple comparisons derived from the sales price of similar assets are adopted.
Market Data - set of information collected on the market
related to a particular property.
Marketing Factor - the ratio between the market value of an asset and its reproduction cost less
depreciation or replacement cost, which may be higher or lower than 1 (one).
Market Research - set of activities for identification, investigation, collection, selection, processing,
analysis and interpretation of results on market data.
Maximum Insurance Value - maximum value of the property for which it is recommendable
to insure it. This criterion establishes that the property whose depreciation is greater than 50% should have its Maximum Insurance Value equivalent to twice as much as the Current Value; and the property whose depreciation is with less than 50%
should have its Maximum Insurance Value equivalent to the Replacement Value.
Multiple - market value of a company, share or invested capital,
divided by a valuation measurement of the company (EBITDA, income, customer volume, etc...).
Net Debt - cash and cash equivalents, net
position in derivatives, short-term and long-term financial debts, dividends receivable and payable, receivables and payables related to debentures, short-term and long-term deficits with pension funds, provisions, and other credits and obligations
to related parties, including subscription bonus.
Non-Operating Assets - those not directly related to the company’s operations (may or may not generate
revenue) and that can be disposed of without detriment to its business.
Null hypothesis in a regression model - hypothesis in which one or a
set of independent variables involved in the regression model are not important to explain the variation of the phenomenon in relation to a pre-established significance level.
Operating Assets - assets that are basic to the company’s operations.
Operating Lease -
that which does not substantially transfer all the risks and benefits incidental to the ownership of the asset. Leases that are not operating leases are classified as financial leases.
Parent Company - an entity that has one or more subsidiaries.
Perpetual Value - value at the end
of the projective period to be added on the cash flow.
Point of Sale - intangible asset that adds value to commercial property, due to its
location and expected commercial exploitation.
Population - total market data of the segment to be analyzed.
Premium for Expected Future Profitability (goodwill) - future economic benefits arising from assets not capable of being individually identified or
separately recognized.
Present Value - the estimated present value of discounted net cash flows in the normal course of business.
Price - the amount by which a transaction is performed involving a property, a product or the right thereto.
Private Area - useful area plus building blocks (such as walls, pillars, etc.) and elevator hallway (in
specific cases).
Property - something of value, subject to use, or that may be the object of a right, which integrates an equity.
Qualitative Variables - variables that cannot be measured or counted, only ordered or ranked, according to attributes inherent to the property (e.g.,
building standard, conservation status and quality of the soil).
Quantitative Variables - variables that can be measured or counted (e.g.,
private area, number of bedrooms and parking spaces).
Range for Real Estate Valuations - range in the vicinity of the point estimator adopted
in the valuation within which to arbitrate the value of the property provided it is justified by the existence of features that are not contemplated in the model.
Re (Cost of Equity) - return required by shareholders for the capital invested.
Real Estate -
property, consisting of land and any improvements incorporated thereto. Can be classified as urban or rural, depending on its location, use or to its highest and best use.
Recoverable Value - the highest fair value of an asset (or cash-generating unit) minus the cost of sales compared with its value in use.
Rd (Cost of Debt) - a measure of the amount paid for the capital earned from third parties, in the form of loans, financing, market funding, among others.
Reference Real Estate - market data with features comparable to the property assessed.
Regression Model - the model used to represent a specific phenomenon, based on a sample, considering the
various influencing characteristics.
Remaining Life - Property’s remaining life.
Replacement Cost - a property’s reproduction cost less depreciation with the same function and features comparable to the property assessed.
Replacement Value for New - value based on what the property would cost (usually in relation to current market prices) to be replaced with or
substituted by a new, equal or similar property.
Reproduction Cost - expense required for the exact duplication of a property, regardless of
any depreciation.
Reproduction Cost Less Depreciation - a property’s reproduction cost less depreciation, considering the state it is
in.
Residual Value - value of new or used asset projected for a date limited to that in which it becomes scrap, considering its being in
operation during the period.
Residual Value of an Asset - estimated value that the entity would obtain at present with the sale of the asset,
after deducting the estimated costs thereof, if the asset were already at the expected age and condition at the end of its useful life.
Sample - set of market data representative of a population.
Scrap Value - market value of a property’s reusable materials in disabling conditions, without their being used for production purposes.
Shareholders’ Equity at Market Prices - see Assets Approach.
Statistical Inference - part
of statistical science that allows drawing conclusions about the population from a sample.
Subsidiary - entity, including that with no legal
character, such as an association, controlled by another entity (known as the parent company).
Supporting Documentation - documentation
raised and provided by the client on which the report premises are based.
Survey - evidence of local events through insightful observations
in a property and of the factors and conditions that constitute or influence it.
Tangible Asset - physically existing asset, such as land,
building, machinery, equipment, furniture and tools.
Technical Report - detailed report or technical clarification issued by a legally
qualified
and trained professional on a specific subject.
Total Construction Area - resulting
from the sum of the real private area and the common area allocated to an independent unit, defined according to ABNT.
Urbanizable Land -
land eligible to receive urban infrastructure works aiming at its efficient use, by means of the subdivision, split or implementation of a business.
Useful Area - real private area subtracted from the area occupied by walls and other building blocks that prevent or hinder its use.
Useful Economic Life - the period in which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset by the entity.
Valuation - act or process of determining the value of an asset.
Valuation Methodology - one or more approaches used in developing evaluative calculations for the indication of the value of an asset.
Value at Risk - representative value of the share of the property one wishes to insure and that may correspond to the maximum insurable value.
Value in Use - value of a property in operating conditions in its present state, such as the useful part of an industry, including, where
relevant, the costs of design, packaging, taxes, freight and installation.
Value Plan - the graphic representation or listing of generic
square meter values of land or of the real estate on the same date.
WACC (Weighted Average Cost of Capital) - model in which capital cost is
determined by the weighted average of the market value of capital structure components (own and others).
Exhibit 2.3
PROTOCOL AND JUSTIFICATION OF THE MERGER OF COARI PARTICIPAÇÕES S.A. INTO BRASIL TELECOM S.A.
COARI PARTICIPAÇÕES S.A.,
a publicly-held company with head offices in the City of Rio de Janeiro, State of Rio de Janeiro, Rua Humberto de Campos 425, 8th floor - part, registered
with the Treasury Ministry on the National Corporate Taxpayers’ Register under CNPJ/MF No. 04.030.087/0001-09, represented herein as set forth in its corporate by-laws (“
Coari
”);
and
BRASIL TELECOM S.A.
, a publicly-held company with head offices in the City of Rio de Janeiro, Rua General Polidoro, No. 99, 5th
floor/part – Botafogo, registered with the Treasury Ministry on the National Corporate Taxpayers’ Register under CNPJ/MF No. 76.535.764/0001-43, represented herein as set forth in its corporate by-laws (“
BRT
”);
Coari and BRT, together called simply the “
Parties
” or “
Companies
”.
WHEREAS:
|
(i)
|
BRT is a publicly-held company that is a direct subsidiary of Coari, whose purpose is to provide telecommunications services and perform other activities that are
necessary or useful for the provision of such services, in compliance with the concessions, authorizations and permits granted thereto. When pursuing its purpose, BRT may acquire third party assets, goods and rights in its net equity, as well as:
(i) hold stakes in the capital of other companies, provided that it complies with the Brazilian national telecommunications policy; (ii) establish wholly-owned subsidiaries in order to perform activities encompassed by its purpose, when
decentralization is recommended; (iii) undertake the importation of goods and services required to perform the activities encompassed by its purpose; (iv) provide technical assistance services to telecommunications companies performing
activities of common interest; (v) undertake activities related to studies and surveys fostering the development of the telecommunications sector; (vi) execute contracts and agreements with other companies providing telecommunications
services or any persons or entities, in order to ensure the operation of the services, without adversely affecting its duties and responsibilities; and (vii) perform other similar activities or activities correlated to its corporate purpose;
|
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(ii)
|
Coari is a publicly-held company that is the controlling shareholder of BRT, whose purpose is to (i) control companies providing fixed public
telephony services; (ii) promote, through subsidiary or associated companies, the expansion and implementation of fixed telephony services in its respective concession area; (iii) promote, undertake or guide the acquisition of funds from
domestic and foreign sources, to be allocated by Coari or by its subsidiaries; (iv) promote and encourage research activities and studies addressed to the development of the fixed telephony sector; (v) provide either directly or through
subsidiary or associated companies, specialized technical services related to the fixed telephony area; (vi) promote, encourage and coordinate, either directly or through subsidiary or associated
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|
companies, the training or qualification of the personnel required by the fixed telephony sector; (vii) undertake or arrange the importation of goods and services for or through subsidiary
or associated companies; (viii) perform other similar activities or activities correlated to its corporate purpose; and (ix) hold stakes in the capital of other companies;
|
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(iii)
|
On May 24, 2011, the Parties, together with Telemar Norte Leste S.A. (“TMAR”) and Tele Norte Leste Participações S.A. (“TNL” and
together with TMAR, Coari and BRT, the “Oi Companies”) disclosed a Statement of Material Fact to the market in which they announced approval by the prior meeting of the shareholders of TNL’s parent company Telemar
Participações S.A. (“TmarPart”), of instructions to the managements of the Oi Companies to conduct studies and take the steps required to implement a corporate reorganization of the Oi Companies, consisting of (i) the
share exchange between TMAR and Coari, (ii) the merger of Coari into BRT, and (iii) the merger of TNL into BRT (collectively, the “Corporate Reorganization”);
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(iv)
|
Given that the Merger (as defined below) is a transaction between a controlling shareholder and its subsidiary, the managements of TMAR and BRT have constituted
independent special committees, pursuant to and for the purposes of CVM Guideline No. 35, in order to analyze and negotiate the conditions of the Merger and submit its recommendations to the Boards of Directors of the companies;
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(v)
|
On August 1, 2011, the Oi Companies disclosed a Statement of Material Fact to the market in which they announced that the Independent Special Committees of TNL,
TMAR and BRT had provided recommendations to the Boards of Directors of the Oi Companies with respect to the exchange ratios in connection with the Corporate Reorganization. On August 17, 2011, the Oi Companies disclosed a Statement of Material
Fact to the market in which they announced that the Boards of Directors of the Oi Companies had determined the exchange ratios applicable to the Corporate Reorganization;
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(vi)
|
Prior to the Merger, a joint transaction will be completed consisting of a partial split-off of TMAR, with the acquisition of the split-off portion by Coari, and a
share exchange between TMAR and Coari (“Split-Off”/TMAR/Coari Share Exchange”), based on an exchange ratio of one common or preferred share of Coari in substitution for each outstanding common or preferred share of TMAR. As a result,
TMAR will become a wholly-owned subsidiary of Coari, and Coari will have the same shareholding structure as TMAR does currently (except for the shares held in treasury, which will be cancelled);
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(vii)
|
The Oi Companies have extremely complex shareholder bases, which are currently dispersed among three publicly-traded companies with a total of seven different classes
of publicly traded shares; and
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|
(viii)
|
The Corporate Reorganization is intended to simplify the corporate structure and governance of the Oi Companies by consolidating the shareholder bases
of the Oi Companies in one public company with two classes of shares that
|
2
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|
will be traded in Brazil and abroad, eliminating operating costs and overhead while enhancing liquidity for all the shareholders of the Oi Companies;
|
Being in full and fair agreement, the Parties hereby execute this Protocol and Justification of the Merger of Coari Participações S.A. into
Brasil Telecom S.A. (“Protocol and Justification”), in compliance with Articles 224, 225, 227
et seq.
of Law No. 6,404/76 (the “
Brazilian Corporation Law
”), under the following terms and conditions.
CLAUSE ONE – PROPOSED TRANSACTION AND JUSTIFICATION
1.1.
Proposed Transaction
. The Proposed Transaction consists of the merger of Coari into its subsidiary BRT, transferring all the assets of Coari to BRT, which will become the successor of all the
goods, rights and obligations of Coari, pursuant to Articles 227 of the Brazilian Corporation Law (the “
Merger”
).
1.2.
Justification of the Merger
. The Merger is one of the steps of the Corporate Reorganization, the purpose of which is to simplify the corporate structure and governance of the Oi Companies, eliminating operating costs and overhead while
enhancing liquidity for all shareholders of the Oi Companies. Furthermore, the managements of Coari and BRT believe that the Merger furthers the best interests of their shareholders, particularly through (i) consolidating the shareholder bases
of the Oi Companies in one public company with two classes of shares that will be traded in Brazil and abroad; (ii) simplifying the capital and corporate structures of Coari and BRT, reducing administrative costs; (iii) aligning the
interests of the shareholders of Coari and BRT; (iv) enhancing the liquidity of the shares issued by BRT; and (v) promptly eliminating the costs of separate listings of the shares of Coari and BRT, as well as costs arising from separately
complying with the public disclosure requirements applicable to Coari and BRT.
CLAUSE TWO – INDEPENDENT SPECIAL COMMITEES
2.1. Pursuant to the provisions of CVM Guideline No. 35, the managements of TMAR and BRT each constituted an independent special
committee to analyze and negotiate the conditions of the Merger. After independently analyzing and discussing the conditions for the Merger, based on the documents and information provided by the management of the Companies and other data publically
available regarding the Oi Companies, and in compliance with the information examined and discussed with Banco Bradesco BBI S.A. and Banco Itaú BBA S.A., the independent financial advisors engaged to provide assistance with respect to the
analysis of the Merger by the TMAR and BRT Independent Special Committees, respectively, the Independent Special Committees presented their conclusions to the management of the Companies, concluding that the following exchange ratios represent an
appropriate appraisal of the value of the Companies and is fair for the Merger.
3
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Original Share/Share to be distributed
|
|
Exchange Ratio*
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|
TMAR3/BRTO3
|
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5.1149x
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|
TMAR5 and TMAR 6/BRTO4
|
|
4.4537x**
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TMAR5 and TMAR 6/BRTO3
|
|
3.8620x**
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*
|
The exchange ratios disclosed in the table above are not cumulative, as set forth in Clause 3.1.
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|
**
|
The exchange ratios for TMAR5 and TMAR6/BRTO4 shares and TMAR5 and TMAR6/BRTO3 shares shall comply with the provisions established in Clause 3.1.2.
|
2.2. Given that following the Split-Off/TMAR/Coari Share Exchange, Coari will have the same shareholding structure as TMAR does
currently (except for the shares held in treasury, which will be cancelled), the exchange ratios negotiated by the independent special committees of TMAR and BRT will be applicable to the merger of Coari into BRT.
2.2.1. In order to comply with the legal limit for the division of share capital between shares with and without voting rights, the
exchange ratios recommended by the independent special committees shall be adjusted, so that the holder of each Coari preferred share will receive in exchange both common and preferred shares of BRT, as provided in the following Clause.
CLAUSE THREE – NUMBER, TYPE AND CLASS OF SHARES TO BE DISTRIBUTED TO COARI SHAREHOLDERS
3.1.
Number, Type and Class of Shares to be Distributed
. As a result of the Merger, BRT will distribute 5.1149 common shares of BRT in substitution
for each outstanding common share of Coari, and 0.3904 common shares and 4.0034 preferred shares of BRT in substitution for each outstanding preferred share of Coari (the “Exchange Ratios”).
3.1.1.
Distribution and Redemption BRT Shares Prior to the Merger
. At the extraordinary general shareholders’ meeting of BRT
called to consider and approve the Merger, BRT will propose the issuance of redeemable stock of BRT to be distributed exclusively to BRT shareholders prior to the Merger, which will be redeemed immediately in cash for the aggregate amount of R$1.5
billion, or the equivalent of R$2.543282 (two
reais
, fifty-four
centavos
and fraction) per share to be paid in proportion to the interest owned by each shareholder in the equity capital of BRT. The Exchange Ratio presented above has
been adjusted to reflect the value of the shares of BRT to be redeemed.
3.1.2. The Exchange Ratio initially respects the
classes of shares currently owned by each shareholder. However, in order to comply with the legal limit on the division of the equity capital of BRT between shares with and without voting rights, the holders of Coari preferred shares will also
receive common shares issued by BRT in replacement, in the proportion of 10.11% of the value of their shares, and therefore will receive 10.11% of the announced exchange ratio of TMAR5 and TMAR6/BRTO3 (3.8620x*10.11%=0.39045x) and 89.89% of the
announced exchange ratio of TMAR5 and TMAR6/BRO4 (4.4537x*89.89%=4.0034x).
4
3.2.
Criteria Used to Determine the Exchange Ratios
. The Exchange Ratios were approved by the Boards
of Directors of TMAR, Coari and BRT based on the analysis and negotiations conducted by the independent special committees of TMAR and BRT, which have negotiated the conditions to the Merger, as set forth in CVM Guideline No. 35. The
independent special committees based their recommendations to the Boards of Directors of TMAR, Coari and BRT on market prices of the preferred and common shares of TMAR and BRT (assuming that the value of TMAR6 shares is the same as TMAR5 shares),
using as a parameter the average trading volume of these shares during the thirty (30) days prior to the date of the Statement of Material Fact that announced the Merger on May 24, 2011. The Exchange Ratios take into consideration the fact
that the shares issued by BRT are liquid, the distribution of BRT redeemable shares announced in the Statement of Material Fact released on May 24, 2011, and that the valuation method of shares at market prices is the most appropriate.
3.3.
Share Fractions
. Fractional shares issued by BRT and distributed to individual Coari shareholders in connection with the Merger
will be grouped into full shares and sold in auctions to be held on the BM&FBOVESPA – Bolsa de Valores, Mercadorias e Futuros (the “BM&FBOVESPA”), with the proceeds of such auctions, delivered to the respective shareholders
after the final financial settlement of the sale of such shares in the auctions.
CLAUSE FOUR – NET WORTH APPRAISAL CRITERIA FOR BRT
AND COARI
4.1.
Net Worth Appraisal
. The shares of Coari was appraised on the basis of their book value, as set forth in the audited
financial statements of Coari as of the base date of June 30, 2011 (the “Base Date”). Pursuant to the provisions set forth in Articles 226 and 227 of the Brazilian Corporation Law, Apsis Consultoria Empresarial Ltda., with head
offices at Rua São José, No. 90 – suite 1,082, in the City and State of Rio de Janeiro, registered with the Treasury Ministry on the National Corporate Tax-Payers’ Roll under CNPJ/MF No. 27.281.922/0001-70
(“
Apsis
”) was selected to conduct the appraisal of the net equity of Coari. The selection and engagement of Apsis must be ratified and approved by the shareholders of Coari and BRT. As set forth in the Equity Appraisal Report
included as Annex 4.1 hereto, the book value of the net equity of Coari on the Base Date was R$10,394,447,173.03 (ten billion, three hundred ninety-four million, four hundred forty-seven thousand, one hundred seventy-three
reais
and three
centavos
), or R$30.21 (thirty
reais
and twenty-one
centavos
) per Coari share, taking into account the previous partial split-off of TMAR and the acquisition of the split-off portion by Coari.
4.2.
Appraisal of the Net Worth of Coari and BRT at Market Prices
. In compliance with the provisions set forth in Article 264 of the Brazilian
Corporation Law, Apsis was selected to prepare the net worth appraisal report of Coari and BRT at market prices. The appraisals of the net worth of Coari and BRT at market prices included as Annex 4.2 hereto were prepared using the same criteria and
as of the Base Date (“
Appraisal Report on Net Worth at Market Prices
”), resulting in, solely for the purposes of Article 264 of the Brazilian Corporation Law, an Exchange Ratio of 1.963406 BRT shares for each Coari share.
5
4.3.
Treatment of Equity Variations
. Any equity variations occurring in Coari as from the Base Date
until the date of the approval of the Merger will be absorbed directly by BRT.
CLAUSE FIVE – SHARES OF ONE COMPANY HELD BY ANOTHER
AND SHARES HELD IN TREASURY
5.1.
Treatment of Shares Issued by one Company and Held by Another Company
. Upon the approval of the
Merger and the resulting closure of Coari, all shares issued by BRT and held by Coari will be canceled. There are no shares issued by Coari held by BRT.
5.2.
Treatment of Shares Held in Treasury
. As a result of the Merger, all of the shares held by BRT in treasury prior to the Merger will be cancelled.
CLAUSE SIX – INCREASE IN THE EQUITY CAPITAL OF BRT
6.1.
Increase in the Equity Capital of BRT
. The Merger will result in an increase in the equity capital of BRT in the amount of R$2,701,227,693.42 (two billion, seven hundred one million, two
hundred twenty-seven thousand, six hundred ninety-three
reais
and forty-two
centavos
) through the absorption of the net assets of Coari as set forth in the Equity Appraisal Report and in compliance with the provisions set forth in
Article 227, §1, of the Brazilian Corporation Law. BRT will issue 700,064,138 (seven hundred million, sixty-four thousand, one hundred thirty-eight) registered common shares and 632,075,392 (six hundred thirty-two million, seventy-five
thousand, three hundred ninety-two) registered preferred shares, without par value (“
Shares
”), that will be distributed to the holders of Coari shares following the Split-Off”/TMAR/Coari Share Exchange, replacing the Coari
shares held by such holders, which will be cancelled.
6.2.
Composition of the Net Assets of Coari
. The book value of the net assets of
Coari to be acquired by BRT is R$5,317,534,502.01 (five billion, three hundred seventeen million, five hundred forty-four thousand, five hundred two
reais
and one
centavo
), of which R$2,701,227,693.42 (two billion, seven hundred one
million, two hundred twenty-seven thousand, six hundred ninety-three
reais
and forty-two
centavos
) will be allocated to the increase in the equity capital of BRT and R$2,616,306,808.59 (two billion, six hundred sixteen million, three
hundred six thousand, eight hundred eight
reais
and fifty-nine
centavos
)will be allocated to the capital reserve account of BRT.
6.3.
Composition of the Equity Capital of BRT after the Merger
. As a result of the above-mentioned capital increase, the equity capital of BRT
will increase to R$7,934,270,818.46 (seven billion, nine hundred thirty-four million, two hundred seventy thousand, eight hundred eighteen
reais
and forty-six
centavos
), , represented by 903,487,314 (nine hundred three million, four
hundred eighty-seven thousand, three hundred fourteen) registered common shares and 1,018,441,209 (one billion, eighteen million, four hundred forty-one thousand, two hundred nine) registered preferred shares, with no par value.
6
6.4. All the shares issued by Coari will be canceled through the Merger, being replaced by preferred and
common shares to be issued by BRT, in accordance with the Exchange Ratios as adjusted as set forth in Clause 3.1.2.
CLAUSE SEVEN –
AMENDMENT OF THE CORPORATE BY-LAWS OF BRT
7.1.
Amendment to the BRT Corporate By-Laws
. As disclosed in the Material Fact released
on May 24, 2011, the Corporate Reorganization comprises, among other transactions, the merger of TNL into BRT and the Merger provided for in this Protocol and Justification, which will be both considered at a single general shareholders’
meeting of BRT, to be timely called. As a result of the merger of TNL into BRT and the Merger, the corporate by-laws of BRT must be amended in order to reflect the change in the share capital and number of shares into which BRT’s share capital
is divided. Therefore, after these transactions are approved, the following proposed amendment to the main section of Article 5 of the corporate by-laws of BRT will be submitted to its shareholders:
“
Article 5
- The fully paid-in and subscribed Equity Capital is R$6,816,467,847.01(six billion, eight hundred sixteen million,
four hundred sixty-seven thousand, eight hundred forty-seven
reais
and one
centavo
), represented by 1,797,069,689 (one billion, seven hundred ninety-seven million, sixty-nine thousand, six hundred eighty-nine) shares, consisting of
598,999,380 (five hundred ninety-eight million, nine hundred ninety-nine thousand, three hundred eighty) registered common shares and 1,198,070,309 (one billion, one hundred ninety-eight million, seventy thousand, three hundred nine) registered
preferred shares, without par value.”
CLAUSE EIGHT – REASONS FOR THE MERGER
8.1.
Reasons for the Merger
. The Merger is one of the steps of the Corporate Reorganization and the managements of the Oi Companies believe that
the Merger is an essential step of the Corporate Reorganization and that the Merger furthers the best interests of Coari, BRT and their shareholders, particularly through:
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|
(i)
|
simplifying the corporate structure, which is currently extremely complex and includes three publicly-held companies with seven different classes of publicly traded
shares, and governance of the Oi Companies by consolidating the shareholder bases of the Oi Companies in one public company with two classes of shares that will be traded in Brazil and abroad;
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(ii)
|
reduce operational, administrative and financial costs following the consolidation of the general management of the Oi Companies, the simplification of their capital
structure, and the improvement of their ability to attract investments and access the capital markets;
|
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(iii)
|
aligning the interests of the shareholders of Coari and BRT;
|
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(iv)
|
enhancing the liquidity of the shares issued by BRT; and
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7
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(v)
|
eliminating the costs of separate listings of the shares of Coari and BRT, as well as those costs arising from separately complying with the public disclosure
requirements applicable to Coari and BRT.
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CLAUSE NINE – TYPES OF SHARES TO BE ISSUED TO THE COARI SHAREHOLDERS
9.1.
Shares to be Issued to the Coari Shareholders
. The holders of common shares of Coari will receive common shares of BRT and
holders of preferred shares of Coari will receive common and preferred shares of BRT, in order to maintain the required proportion between the common and preferred shares of BRT. The common and preferred shares of BRT to be distributed to the Coari
shareholders will entitle them to the same rights as those conferred by the other common shares and preferred shares of BRT, respectively, including full receipt of dividends and/or interest on shareholders’ equity that may be declared by BRT
after the date on which the Merger is approved.
CLAUSE TEN – WITHDRAWAL RIGHTS
10.1.
Withdrawal Rights of the Shareholders of Coari
. Pursuant to the provisions set forth in Article 137 of the Brazilian Corporation Law,
shareholders of Coari that do not approve the Merger, through dissent, abstention or not attending the extraordinary general shareholders’ meeting of Coari called to consider the Merger, are entitled to withdrawal rights, unless the shares
owned by such shareholders possess liquidity and dispersal in the market, under the terms of Article 137, II of the Brazilian Corporation Law, which is not the case of the shares issued by Coari. In order for the exercise the withdrawal rights to be
effective, the shareholders of Coari must exercise their withdrawal rights with respect to the totality of the shares owned by them at the time of the general shareholders’ meeting of Coari that approves the Merger.
10.1.1. Shareholders owning Coari common and preferred shares will have withdrawal rights.
10.1.2. A shareholder of Coari must specifically express its intention to exercise its withdrawal rights within 30 (thirty) days after the
publication date of the minutes of the General Shareholders’ Meeting of Coari at which the Merger is approved.
10.2.
Value of
Reimbursement to Coari Shareholders
. Shareholders of Coari that dissent at the general shareholders’ meeting of Coari which will consider the Merger will have the right to be reimbursed for their Coari shares at the value of R$56.3622
(fifty-six
reais
, thirty-six
centavos
and fraction) per share, corresponding to the equity value of Coari as set forth on the balance sheet, dated as of June 30, 2011, to be approved at the extraordinary shareholders’ meeting
that considers the Merger.
10.4.1. Given that the Exchange Ratios proposed to the non-controlling shareholders of Coari for
the Merger, as set forth in Clause 3.1, is more favorable then the one resulting from the comparison of the net worth of Coari and BRT at market prices provided in the Appraisal Report on Net Worth at Market Prices, pursuant to the § 3 of
Article 264 of the Brazilian Corporation Law, the dissenting shareholders at the extraordinary general shareholders’
8
meeting of Coari called to consider the Merger will not be able to elect to receive a reimbursement value calculated based on the net worth at market prices in exchange for their withdrawn
shares, and will only be able to receive a reimbursement value based on the equity value of Coari as indicated above.
10.3.
Payment of
Reimbursement
. The payment of the reimbursement value for the withdrawn shares will depend on the effective completion of the Merger, as set forth in Article 230 of the Brazilian Corporation Law. In accordance with Article 137 of the Brazilian
Corporation Law, the reimbursement of the value of the withdrawn shares will be assured only in respect of shares for which the shareholder was proven to be the owner at the close of trading on May 24, 2011, the date of publication of the
Statement of Material Fact announcing the Corporate Reorganization and the Merger and which have been owned by the shareholder uninterruptedly through the effective exercise of the right of withdrawal.
10.4.
Rescission of the Merger
. Pursuant to Article 137 §3 of the Brazilian Corporation Law, in the event that the amount to be paid to
shareholders of Coari in connection with the exercise of withdrawal rights would, in the opinion of the management of BRT, jeopardize the financial stability of BRT, the Merger may be rescinded through a proposal presented by the management of BRT.
CLAUSE ELEVEN – APPROVAL BY THE GENERAL SHAREHOLDERS’ MEETINGS OF COARI AND BRT
11.1.
General Shareholders’ Meetings
. In order to approve the Merger, general shareholders’ meetings of Coari and BRT will be held to
consider the Merger. The Merger will be considered by the same general shareholders’ meetings of BRT that will be held to consider the merger of TNL and BRT.
CLAUSE TWELVE – GENERAL PROVISIONS
12.1.
Cessation of Existence of Coari
. Upon
the effective completion of the Merger, Coari will cease to exist, and BRT will absorb all the assets, rights, goods, obligations and responsibilities of Coari.
12.2.
Auditing of the Financial Statements of Coari and BRT
. In compliance with Article 12 of CVM Instruction No. 319/99, the financial statements of Coari and BRT dated as of June 30,
2011 that served as the basis for the Merger were audited by Deloitte Touche Tohmatsu.
12.3.
Documents Available to
the Shareholders
. All the documents mentioned in this Protocol and Justification, as well as all the other documents already available at this moment, such as reports of the Independent Special Committees and of their advisors, will be available
to the respective Coari and BRT shareholders as required by applicable law and regulation, and may be reviewed by such shareholders at the following addresses: (i) Rua General Polidoro 99, 5
th
floor, Botafogo, City of Rio de Janeiro, State of Rio de Janeiro;
and (ii) Rua Humberto de Campos 425, 5
th
floor
(part), Leblon, City of Rio de Janeiro, State of Rio de Janeiro. These documents will also be available at the websites of the CVM (
www.cvm.gov.br
), BM&FBOVESPA (
www.bmfbovespa.com.br
) and the Investor Relations websites of the
Companies (
www.oi.net.br/ri
).
9
12.4.
Notification of the Merger to the Authorities
. The Merger is being analyzed by the Brazilian
Telecommunications Industry Regulator (“ANATEL”). Any other necessary communications related to the Merger will be submitted to the relevant government authorities in compliance with the governing law.
12.5.
Registration with the U.S. Securities and Exchange Commission (the “SEC”)
. Although we are relying on an exemption from the
registration requirements under the U.S. Securities Act of 1933, as amended, in connection with the Merger, we will file a registration statement with the SEC in connection with the merger of TNL into BRT. As a result, the general shareholders’
meetings that will consider the Merger will only be called after such registration statement has been declared effective by the SEC. At this moment, without adverse effects to the partial disclosure of some data and information related to the
Corporate Reorganization, the materials set forth in CVM Instruction No. 481/09 and CVM Instruction No. 319/99, including the Material Fact provided for in CVM Instruction No. 319/99, will also be fully disclosed.
12.6.
Approval of the Corporate Reorganization
. The Corporate Reorganization assumes the share exchange between TMAR and Coari and the mergers of
both Coari and TNL into BRT will occur on the same date, together and inseparable one from the others, and as a result, the completion of each of these transactions, including the Merger, will be conditioned on the approval of the other
transactions.
12.7.
Survival of Valid Clauses
. Should any clause, provision, term or condition of this Protocol and Justification be
deemed invalid, the other clauses, provisions, terms and conditions hereof will not be adversely affected by such invalidation.
12.8.
Election of Courts of Law
. The Central Law Court of the Rio de Janeiro State Court District is hereby elected to settle all issues arising from this Protocol and Justification, waiving any other, no matter how much more privileged it may be.
(rest of the page intentionally left blank)
10
BEING IN FULL AND FAIR AGREEMENT, the Parties sign this Protocol and Justification in 3 (three) copies of
identical form and content for one single purpose, together with the two undersigned witnesses.
Rio de Janeiro, August 26,
2011.
COARI PARTICIPAÇÕES S.A.
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/s/ Francisco Tosta Valim Filho
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/s/ Maxim Medvedovsky
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Name: Francisco Tosta Valim Filho
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Name: Maxim Medvedovsky
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Position: Chief Executive Officer
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Position: Officer
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BRASIL TELECOM S.A.
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/s/ Francisco Tosta Valim Filho
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/s/ Maxim Medvedovsky
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Name: Francisco Tosta Valim Filho
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Name: Maxim Medvedovsky
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Position: Chief Executive Officer
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Position: Officer
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Witnesses
:
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/s/ Carolina Ohana Marques de Cunha
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/s/ Andrea Gerlach Lima de Alencar
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Name: Carolina Ohana Marques de Cunha
|
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Name: Andrea Gerlach Lima de Alencar
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Identity Card No:
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Identity Card No:
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11
Annex 4.1
Equity Appraisal Report
|
REQUESTING PARTY:
|
BRASIL TELECOM S.A.,
with its head office located at Rua General Polidoro, nº 99, 5º andar (parte), in Botafogo, in the city and state of Rio de Janeiro, registered with the
General Roster of Corporate Taxpayers (CNPJ) under Nº. 76.535.764/0001-43, hereinafter referred to as
BRT.
|
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OBJECT:
|
COARI PARTICIPAÇÕES S.A.
, with its head office located at Humberto de Campos nº 425 8º andar (parte), in Leblon, in the City and State of Rio De Janeiro,
registered with the General Roster of Corporate Taxpayers (CNPJ) under Nº. 04.030.087/0001-09, hereinafter referred to as
COARI
.
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PURPOSE:
|
To assess the book value of COARI shares in connection with the merger of COARI with and into BRT, pursuant to Law No. 6,404, of Dec/15/1976 (Corporate Law).
|
Laudo RJ-0375/11-03
TABLE OF CONTENTS
Laudo RJ-0375/11-03
1.
INTRODUCTION
APSIS CONSULTORIA EMPRESARIAL Ltda., hereinafter referred to as APSIS, with its head office located at Rua da
Assembléia, nr. 35, 12th floor, in the City and State of Rio de Janeiro, registered with the General Roster of Corporate Taxpayers (CNPJ) under No 08.681.365/0001-30, was appointed to assess the book value of COARI shares in connection with
the merger of COARI with and into BRT, pursuant to Law No. 6,404 of 12/15/1976 (Corporate Law).
In preparing this report, we used data
and information provided by third parties, in the form of documents and verbal interviews with the client. Estimates used in this process are based on documents and information which include, among others, the following:
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•
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Balance Sheet of COARI as of June 30, 2011.
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APSIS has recently performed appraisals for publicly-held companies, for various purposes, of the following companies:
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•
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AMÉRICA LATINA LOGÍSTICA DO BRASIL S/A
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•
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ESTA-EMPRESA SANEADORA TERRITORIAL AGRÍCOLA S/A.
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•
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GEODEX COMMUNICATIONS DO BRASIL S/A
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•
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L.R. CIA.BRAS.PRODS.HIGIENE E TOUCADOR S/A
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•
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LIGHT SERVIÇOS DE ELETRICIDADE S/A
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•
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TAM TRANSPORTES AÉREOS MERIDIONAL S/A
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The
APSIS team in charge of preparing this report comprises the following professionals:
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•
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AMILCAR DE CASTRO Project manager
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•
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ANA CRISTINA FRANÇA DE SOUZA Civil engineer Post-graduate in Accounting Sciences (CREA/RJ 91.1.03043-4)
|
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•
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BETINA DENGLER Project manager
|
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•
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CESAR DE FREITAS SILVESTRE Accountant (CRC/RJ 44779/O-3)
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•
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FLAVIO LUIZ PEREIRA Accountant (CRC/RJ 022016-O-9)
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•
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LUIZ PAULO CESAR SILVEIRA Mechanical engineer Master of Business Management (CREA/RJ 89.1.00165-1)
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•
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MARGARETH GUIZAN DA SILVA OLIVEIRA Civil engineer (CREA/RJ 91.1.03035-3)
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•
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RICARDO DUARTE CARNEIRO MONTEIRO Civil engineer Post-graduate in Economic Engineeering (CREA/RJ 30137-D)
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•
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SÉRGIO FREITAS DE SOUZA Economist (CORECON/RJ 23521-0)
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•
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WASHINGTON FERREIRA BRAGA Accountant (CRC/RJ 024.100-6 / CVM 6734)
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Laudo RJ-0375/11-03
2. PRINCIPLES
AND QUALIFICATIONS
This report strictly complies with the fundamental principles described below:
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•
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The consultants and appraisers do not have any direct or indirect interest in the merger, nor are there any other relevant circumstances which may
characterize a conflict of interest.
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•
|
|
To the best of the consultants’ knowledge and belief, the analyses, opinions and conclusions expressed in this Report are based on data,
diligence, research and surveys that are true and correct.
|
|
•
|
|
This Report presents all the limiting conditions imposed by the adopted methodologies, which affect the analyses, opinions and conclusions contained
therein.
|
|
•
|
|
APSIS professional fees are not in any way whatsoever subject to the conclusions of this report.
|
|
•
|
|
APSIS assumes full responsibility for the matter of Appraisal Engineering, including implicit appraisals, and for the exercise of its honorable duties,
primarily established in the appropriate laws, codes or regulations.
|
|
•
|
|
In this report, it is assumed that the information received from third parties is correct, and the sources thereof are contained in this Report.
|
|
•
|
|
This Report was prepared by APSIS and no one other than the consultants themselves prepared the analyses and respective conclusions.
|
|
•
|
|
For projection purposes, we start with the premise of the inexistence of liens or encumbrances of any nature, whether judicial or extrajudicial,
affecting the companies in question, other than those listed in this Report.
|
|
•
|
|
This Report complies with the specifications and criteria prescribed by USPAP (Uniform Standards of Professional Appraisal Practice), in addition to
the requirements imposed by different bodies and regulations, where applicable, such as: Finance Ministry, the Central Bank of Brazil, Banco do Brasil, CVM (Brazilian Securities and Exchange Commission), SUSEP (Superintendence of Private Insurance),
RIR (Income Tax Regulations), etc.
|
|
•
|
|
The managers of the companies involved did not direct, restrict, hinder or take any actions which have or may have compromised access to, use or
knowledge of information, assets, documents, or work methods applicable to the quality of the respective conclusions contained herein.
|
Laudo RJ-0375/11-03
3.
RESPONSIBILITY LIMITS
|
•
|
|
To prepare this report, APSIS used historic data and information, audited by third parties or unaudited, and unaudited projected data provided in
writing or verbally by the company’s management or obtained from the sources mentioned. Therefore, APSIS has assumed as true the data and information obtained for this report and does not have any responsibility in connection with its
truthfulness.
|
|
•
|
|
The scope of this work did not include an audit of the financial statements or a revision of the work performed by the company’s auditors.
|
|
•
|
|
Our work was developed for use by the requesting party in connection with the previously described objectives.
|
|
•
|
|
We do not take responsibility for occasional losses to the requesting party or to other parties as a result of the use of data and information provided
by the company and contained herein.
|
Laudo RJ-0375/11-03
4.
APPRAISAL METHODOLOGY
Analysis of the previously mentioned supporting documents designed to ascertain whether bookkeeping was
accurately conducted and was in compliance with the legal, regulatory, normative, statutory and contractual provisions which govern the matter, within the scope of “Generally Accepted Accounting Principles and Conventions”.
We examined the balance sheet of COARI, as well as all other documents required for the preparation of this report, which was prepared on the basis of
COARI balance sheet for the period ending June 30, 2011.
It was ascertained that the assets and liabilities of COARI have been duly
accounted for.
Laudo RJ-0375/11-03
5. NET EQUITY
APPRAISAL
We examined the accounting books of COARI, as well as all other documents required for the preparation of this report.
The experts have ascertained that the book net equity value of COARI in connection with the merger of COARI with and into BRT is R$
10,394,447,173.03 (ten billion, three hundred ninety four million, four hundred forty four thousand, one hundred seventy three reais and three centavos), as of June 30, 2011.
Laudo RJ-0375/11-03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COARI
PARTICIPAÇÕES S.A.
|
|
ACCOUNTING STATEMENT
|
|
|
BALANCE SHEET-
(THOUSAND REAIS)
|
|
BALANCE AS OF
6/30/2011
|
|
|
SUBSEQUENT
EVENT (1)
|
|
|
SUBSEQUENT
EVENT (2)
|
|
|
SUBSEQUENT
EVENT (3)
|
|
|
PRO FORMA
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
938,789,070.54
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
938,789,070.54
|
|
|
NON-CURRENT ASSETS
|
|
|
15,447,002,224.69
|
|
|
|
0.00
|
|
|
|
20,468,201,465.96
|
|
|
|
-10,370,088,620.79
|
|
|
|
25,545,115,069.86
|
|
|
LONG TERM ASSETS
|
|
|
932.88
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
932.88
|
|
|
PERMANENT
|
|
|
15,447,001,291.81
|
|
|
|
0.00
|
|
|
|
20,468,201,465.96
|
|
|
|
-10,370,088,620.79
|
|
|
|
25,545,114,136.98
|
|
|
INVESTMENTS
|
|
|
15,447,001,291.81
|
|
|
|
0.00
|
|
|
|
20,468,201,465.96
|
|
|
|
-10,370,088,620.79
|
|
|
|
25,545,114,136.98
|
|
|
- Brasil Telecom S.A.
|
|
|
15,447,001,291.81
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
-10,370,088,620.79
|
|
|
|
5,076,912,671.02
|
|
|
- Telemar Norte Leste S.A.
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
20,468,201,465.96
|
|
|
|
0.00
|
|
|
|
20,468,201,465.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
16,385,791,295.23
|
|
|
|
0.00
|
|
|
|
20,468,201,465.96
|
|
|
|
-10,370,088,620.79
|
|
|
|
26,483,904,140.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
761,830.57
|
|
|
|
1,074,598,034.67
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
1,075,359,865.24
|
|
|
Loans and Financing
|
|
|
0.00
|
|
|
|
1,074,598,034.67
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
1,074,598,034.67
|
|
|
Other Current Liabilities
|
|
|
761,830.57
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
761,830.57
|
|
|
NON-CURRENT LIABILITIES
|
|
|
2,514,781.74
|
|
|
|
15,011,582,320.39
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
15,014,097,102.13
|
|
|
LONG TERM LIABILITIES
|
|
|
2,514,781.74
|
|
|
|
15,011,582,320.39
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
15,014,097,102.13
|
|
|
Loans and Financing
|
|
|
2,513,017.98
|
|
|
|
15,011,582,320.39
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
15,014,095,338.37
|
|
|
Other Non-Current Liabilities
|
|
|
1,763.76
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
1,763.76
|
|
|
EQUITY
|
|
|
16,382,514,682.92
|
|
|
|
-16,086,180,355.06
|
|
|
|
20,468,201,465.96
|
|
|
|
-10,370,088,620.79
|
|
|
|
10,394,447,173.03
|
|
|
Capital
|
|
|
15,789,243,643.02
|
|
|
|
-14,358,752,355.06
|
|
|
|
20,468,201,465.96
|
|
|
|
0.00
|
|
|
|
21,898,692,753.92
|
|
|
Capital Reserves Available
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
Distributable Profit Reserves
|
|
|
1,727,428,000.00
|
|
|
|
-1,727,428,000.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
Equity Valuation Adjustments
|
|
|
-956,872,215.41
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
-10,370,088,620.79
|
|
|
|
-11,326,960,836.20
|
|
|
Net Income
|
|
|
-177,284,744.69
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
-177,284,744.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
16,385,791,295.23
|
|
|
|
0.00
|
|
|
|
20,468,201,465.96
|
|
|
|
-10,370,088,620.79
|
|
|
|
26,483,904,140.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Net Book Equity Value for COARI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R$
|
10,394,447,173.03
|
|
|
- COARI Investments in shares of BRT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-R$
|
5,076,912,671.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Net Book Equity Value to be incorporated in BRT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R$
|
5,317,534,502.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Incorporation of the portion of the shareholders’ equity of TMAR which was split-off.
|
|
(2)
|
Represents the share exchange between TMAR and COARI
|
|
(3)
|
Represents reversal of negative goodwill recorded as a result of the acquisition of Brasil Telecom in January 2009 for a purchase price which was less
than the book value of its assets.
|
Laudo RJ-0375/11-03
6. CONCLUSION
Considering the verifications performed on the previously mentioned documents and based on APSIS’ analyses, the experts have
concluded that the book net equity value of
Coari
in connection with the merger of COARI with and into
BRT
is equivalent to
R$ 10,394,447,173.03
(ten billion, three hundred ninety four million, four hundred forty four
thousand, one hundred seventy three reais and three centavos). Considering that the net assets merged into BRT is represented shares of stock of BRT owned by COARI; therefore, the net assets to be merged into BRT will result in a reduction of
BRT’s capital of R$
5,317,534,502.01
(five billion, three hundred seventeen million, five hundred thirty four thousand, five hundred two reais and one centavo) as of June 30, 2011.
Having concluded Report RJ-0375/11-03, which consists of 10 (ten) pages typed on one side and 02 (two) attachments and reproduced in 03 (three) original
counterparts, APSIS Consultoria Empresarial Ltda., CRC/RJ 005112/0-9 and CORECON/RJ RF/2.052-4, a company specializing in the appraisal of assets, legally represented by the signatories below, makes itself available for any clarifications which may
be necessary.
Rio de Janeiro, August 12, 2011.
|
|
|
|
|
|
|
LUIZ PAULO CESAR SILVEIRA
Director
|
|
BETINA DENGLER
Project Manager
|
|
WASHINGTON FERREIRA BRAGA
Accountant (CRC/RJ 024.100-6 / CVM 6734)
|
Laudo RJ-0375/11-03
7. LIST OF ATTACHMENTS
|
|
2.
|
SPECIFICATIONS OF THE LIABILITIES OF THE SPLIT-OFF PORTION
|
|
|
3.
|
GLOSSARY AND APSIS’ PROFILE
|
|
|
|
|
|
SÃO PAULO - SP
Alameda Franca, 1467 n° 44
Jardim Paulista,
CEP: 01422-001
Tel.: + 55 11 2626.0510 Fax: + 55 11 3061-5879
|
|
RIO DE JANEIRO - RJ
Rua da Assembleia, nº 35, 12º andar
Centro, CEP: 20011-001
Tel.: + 55 21 2212.6850
Fax: + 55 21 2212.6851
|
Laudo RJ-0375/11-03
ATTACHMENT 1
COARI PRO-FORMA BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS OF
06/30/2011
|
|
|
REDEMPTION
OF BrT
SHARES
|
|
ACQUISITION
OF THE
SPLIT-OFF
PORTION OF
TMAR BY
COARI
|
|
SHARE EXCHANGE
BETWEEN TMAR
AND COARI
|
|
|
PRO-FORMA
BALANCE
|
|
|
PREPARATION FOR
THE MERGER INTO
BRT
|
|
|
NET EQUITY FOR
MERGER INTO BRT
|
|
|
Current Assets
|
|
|
938,789,070.54
|
|
|
|
|
|
|
|
|
|
|
|
938,789,070.54
|
|
|
|
|
|
|
|
938,789,070.54
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Assets
|
|
|
15,447,002,224.69
|
|
|
|
|
|
|
|
20,468,201,465.96
|
|
|
|
35,915,203,690.65
|
|
|
|
(10,370,088,620.79
|
)
|
|
|
25,545,115,069.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
15,447,001,291.81
|
|
|
|
|
|
|
|
20,468,201,465.96
|
|
|
|
35,915,202,757.77
|
|
|
|
(10,370,088,620.79
|
)
|
|
|
25,545,114,136.98
|
|
|
Investments in TMAR
|
|
|
|
|
|
|
|
|
|
|
20,468,201,465.96
|
|
|
|
20,468,201,465.96
|
|
|
|
|
|
|
|
20,468,201,465.96
|
|
|
Investments in BrT
|
|
|
15,447,001,291.81
|
|
|
|
|
|
|
|
|
|
|
|
15,447,001,291.81
|
|
|
|
(10,370,088,620.79
|
)
|
|
|
5,076,912,671.02
|
|
|
Other non-current assets
|
|
|
932.88
|
|
|
|
|
|
|
|
|
|
|
|
932.88
|
|
|
|
|
|
|
|
932.88
|
|
|
Total Assets
|
|
|
16,385,791,295.23
|
|
|
|
|
|
|
|
20,468,201,465.96
|
|
|
|
36,853,992,761.19
|
|
|
|
(10,370,088,620.79
|
)
|
|
|
26,483,904,140.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COARI PRO-FORMA BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS
OF 06/30/2011
|
|
|
REDEMPTION
OF BrT
SHARES
|
|
ACQUISITION OF
THE SPLIT-OFF
PORTION OF
TMAR BY COARI
|
|
|
SHARE EXCHANGE
BETWEEN TMAR
AND COARI
|
|
|
PRO-FORMA
BALANCE
|
|
|
PREPARATION
FOR THE
MERGER INTO
BRT
|
|
|
NET EQUITY
FOR MERGER
INTO BRT
|
|
|
Current Liabilities
|
|
|
761,830.57
|
|
|
|
|
|
1,074,598,034.67
|
|
|
|
|
|
|
|
1,075,359,865.24
|
|
|
|
|
|
|
|
1,075,359,865.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing
|
|
|
|
|
|
|
|
|
1,074,598,034.67
|
|
|
|
|
|
|
|
1,074,598,034.67
|
|
|
|
|
|
|
|
1,074,598,034.67
|
|
|
Other current liabilities
|
|
|
761,830.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
761,830.57
|
|
|
|
|
|
|
|
761,830.57
|
|
|
Non-Current Liabilities
|
|
|
2,514,781.74
|
|
|
|
|
|
15,011,582,320.39
|
|
|
|
|
|
|
|
15,014,097,102.13
|
|
|
|
|
|
|
|
15,014,097,102.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing
|
|
|
2,513,017.98
|
|
|
|
|
|
15,011,582,320.39
|
|
|
|
|
|
|
|
15,014,095,338.37
|
|
|
|
|
|
|
|
15,014,095,338.37
|
|
|
Other non-current liabilities
|
|
|
1,763.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,763.76
|
|
|
|
|
|
|
|
1,763.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity
|
|
|
16,382,514,682.92
|
|
|
|
|
|
(16,086,180,355.06
|
)
|
|
|
20,468,201,465.96
|
|
|
|
20,764,535,793.82
|
|
|
|
(10,370,088,620.79
|
)
|
|
|
10,394,447,173.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.0 - SHARE CAPITAL
|
|
|
15,789,243,643.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29110000 - COMMON SHARES
|
|
|
6,036,953,836.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29110100 - PREFERRED SHARES
|
|
|
9,752,289,807.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
15,789,243,643.02
|
|
|
|
|
|
(14,358,752,355.06
|
)
|
|
|
20,468,201,465.96
|
|
|
|
21,898,692,753.92
|
|
|
|
|
|
|
|
21,898,692,753.92
|
|
|
Available capital reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-available capital reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.1.2 - PROFIT RESERVES
|
|
|
1,727,428,000.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220000 - LEGAL RESERVE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220030 - RETAINED EARNINGS RESERVE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220040 - INVESTMENT RESERVE
|
|
|
1,727,428,000.00
|
|
|
|
|
|
(1,727,428,000.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29220060 - TAX INCENTIVE RESERVE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributable profit reserves
|
|
|
1,727,428,000.00
|
|
|
|
|
|
(1,727,428,000.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-distributable profit reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.5 - EQUITY VALUATION ADJUSTMENTS
|
|
|
(956,872,215.41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610100 - DERIVATIVES TRANSACTIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610110 - GOODWILL - CAPITAL TRANSACTIONS
|
|
|
(1,656,573,288.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610120 - ADDITIONAL PAID-IN CAPITAL
|
|
|
699,701,072.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610130 - RESERVE - HEDGE ACCOUNT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610140 - VARIATION IN INVESTMENT PARTICIPATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29610150 - VARIATION IN FINANCIAL ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity valuation adjustments
|
|
|
(956,872,215.41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(956,872,215.41
|
)
|
|
|
(10,370,088,620.79
|
)
|
|
|
(11,326,960,836.20
|
)
|
|
29310000 - ACCUMULATED GAIN (LOSS)
|
|
|
(5,724,553,114.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29310010 - GAIN (LOSS) FOR THE PERIOD
|
|
|
5,724,553,114.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.3 - GAIN (LOSS) FOR THE PERIOD
|
|
|
(177,284,744.69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results for the period
|
|
|
(177,284,744.69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(177,284,744.69
|
)
|
|
|
|
|
|
|
(177,284,744.69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity
|
|
|
16,385,791,295.23
|
|
|
|
|
|
|
|
|
|
20,468,201,465.96
|
|
|
|
36,853,992,761.19
|
|
|
|
(10,370,088,620.79
|
)
|
|
|
26,483,904,140.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATTACHMENT 2
Specifications of the Liabilities of the Split-Off Portion
|
|
|
|
|
|
|
|
|
|
|
BOND
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
|
|
2,818,280,659.76
|
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
|
|
(295,242,773.83
|
)
|
|
|
|
|
|
Total balance of related hedges
|
|
|
|
|
553,560,913.34
|
|
|
|
|
|
|
Total indebtedness
|
|
|
|
|
3,076,598,799.27
|
|
|
|
|
|
|
List of related hedging contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Treasury
|
|
Counterparty
|
|
Fair Value
|
|
|
50000000096
|
|
073/2009
|
|
Morgan Stanley
|
|
|
29,385,118.88
|
|
|
50000000098
|
|
080/2009
|
|
Merrill Lynch
|
|
|
19,684,119.03
|
|
|
50000000099
|
|
081/2009
|
|
JP Morgan
|
|
|
11,318,737.75
|
|
|
50000000100
|
|
083/2009
|
|
Merrill Lynch
|
|
|
21,810,749.07
|
|
|
50000000103
|
|
198/2009
|
|
Morgan Stanley
|
|
|
36,925,528.23
|
|
|
50000000109
|
|
086/2009
|
|
JP Morgan
|
|
|
21,504,961.25
|
|
|
50000000110
|
|
087/2009
|
|
JP Morgan
|
|
|
14,336,640.81
|
|
|
50000000112
|
|
102/2009
|
|
Santander
|
|
|
25,918,754.71
|
|
|
50000000114
|
|
020/2010
|
|
Deutsche Bank
|
|
|
13,758,745.76
|
|
|
50000000115
|
|
021/2010
|
|
Standard
|
|
|
23,620,913.91
|
|
|
50000000118
|
|
024/2010
|
|
Deutsche Bank
|
|
|
19,712,839.48
|
|
|
50000000184
|
|
FWD137
|
|
HSBC
|
|
|
24,056,463.50
|
|
|
50000000186
|
|
FWD135
|
|
Deutsche Bank
|
|
|
24,135,261.07
|
|
|
50000000187
|
|
FWD139
|
|
BNP Paribas
|
|
|
24,371,653.79
|
|
|
50000000190
|
|
FWD136
|
|
Itaú BBA
|
|
|
48,191,724.60
|
|
|
50000000191
|
|
FWD141
|
|
Itaú BBA
|
|
|
24,233,758.04
|
|
|
50000000192
|
|
FWD145
|
|
Itaú BBA
|
|
|
24,125,411.38
|
|
|
50000000194
|
|
FWD140
|
|
Bradesco
|
|
|
24,371,653.79
|
|
|
50000000197
|
|
FWD143
|
|
Santander
|
|
|
22,384,954.36
|
|
|
50000000198
|
|
FWD138
|
|
Morgan Stanley
|
|
|
24,361,804.09
|
|
|
50000000205
|
|
FWD151
|
|
Merrill Lynch
|
|
|
8,562,505.85
|
|
|
50000000214
|
|
FWD153
|
|
HSBC
|
|
|
11,242,542.76
|
|
|
50000000218
|
|
FWD157
|
|
Merrill Lynch
|
|
|
5,620,291.42
|
|
|
50000000220
|
|
FWD155
|
|
Santander
|
|
|
5,494,057.79
|
|
|
50000000223
|
|
FWD159
|
|
Morgan Stanley
|
|
|
7,326,872.89
|
|
|
50000000225
|
|
FWD164
|
|
Santander
|
|
|
10,260,873.19
|
|
|
50000000227
|
|
FWD162
|
|
Citibank
|
|
|
3,426,748.40
|
|
|
50000000229
|
|
FWD166
|
|
Itaú BBA
|
|
|
5,678,553.08
|
|
|
50000000232
|
|
FWD170
|
|
Santander
|
|
|
5,382,389.58
|
|
|
50000000234
|
|
FWD168
|
|
Goldman & Sachs
|
|
|
5,309,562.49
|
|
|
50000000236
|
|
FWD172
|
|
Goldman & Sachs
|
|
|
7,046,722.39
|
|
|
50000000204
|
|
002/2011
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000209
|
|
001/2011
|
|
Morgan Stanley
|
|
|
—
|
|
|
50000000211
|
|
003/2011
|
|
Morgan Stanley
|
|
|
—
|
|
|
50000000210
|
|
004/2011
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000212
|
|
007/2011
|
|
Goldman & Sachs
|
|
|
—
|
|
Liabilities (cont.)
|
|
|
|
|
|
|
|
|
|
|
BOND 750 M
|
|
|
|
|
|
Outstanding balance
|
|
|
1,747,218,402.34
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
(23,566,979.55
|
)
|
|
|
|
|
Total balance of related hedges
|
|
|
24,579,375.75
|
|
|
|
|
|
Total indebtedness
|
|
|
1,748,230,798.54
|
|
|
List of related hedging contracts
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Treasury
|
|
Counterparty
|
|
Fair Value
|
|
|
|
|
FWD181
|
|
HSBC
|
|
|
—
|
|
|
|
|
FWD182
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000221
|
|
FWD160
|
|
Deutsche Bank
|
|
|
24,579,375.75
|
|
|
50000000237
|
|
FWD173
|
|
Deutsche Bank
|
|
|
—
|
|
|
50000000238
|
|
FWD174
|
|
BNP Paribas
|
|
|
—
|
|
|
50000000239
|
|
FWD175
|
|
HSBC
|
|
|
—
|
|
|
50000000240
|
|
FWD176
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000241
|
|
FWD177
|
|
HSBC
|
|
|
—
|
|
|
50000000242
|
|
FWD178
|
|
HSBC
|
|
|
—
|
|
|
50000000243
|
|
FWD179
|
|
Merrill Lynch
|
|
|
—
|
|
|
50000000244
|
|
FWD180
|
|
Merrill Lynch
|
|
|
—
|
|
|
|
|
BOND – Citibank
|
|
|
|
|
|
Outstanding balance
|
|
|
226,247,840.06
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
(19,803,067.42
|
)
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
206,444,772.64
|
|
|
|
|
|
DEBENTURE 7 YEARS CDI + 0.55%
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
560,979,560.54
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
560,979,560.54
|
|
|
List of related hedging contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
Treasury
|
|
Counterparty
|
|
Fair Value
|
|
|
50000000068
|
|
001/2007
|
|
Citibank
|
|
|
—
|
|
|
|
|
|
PUBLIC DEBENTURE 2010 5
TH
ISSUANCE – 1
ST
SERIES
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
1,798,777,554.99
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
(8,345,267.02
|
)
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
1,790,432,287.97
|
|
Liabilities (cont.)
|
|
|
|
|
|
|
PUBLIC DEBENTURE 2010 5
TH
ISSUANCE – 2
ND
SERIES
|
|
|
|
|
|
Outstanding balance
|
|
|
269,424,445.82
|
|
|
|
|
|
Transaction costs to appropriate
|
|
|
(1,397,991.59
|
)
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
268,026,454.23
|
|
|
|
|
|
BNDES Direct TJLP05 7 IP
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
9,483,526.73
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
9,483,526.73
|
|
|
|
|
|
BNDES Direct TJLP05 Tranche A
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
20,700,839.87
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
20,700,839.87
|
|
|
|
|
|
BNDES Direct TJLP05 Tranche B
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
5,177,170.72
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
5,177,170.72
|
|
|
|
|
|
BNDES Direct TJLP05 Tranche C
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
808,000.69
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
808,000.69
|
|
|
|
|
|
BNDES Direct TJLP06 Tranche A (1)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
866,900,682.52
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
866,900,682.52
|
|
|
|
|
|
BNDES Direct TJLP06 Tranche A (2)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
281,640,651.26
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
281,640,651.26
|
|
Liabilities (cont.)
|
|
|
|
|
|
|
BNDES Direct TJLP06 Tranche B
|
|
|
|
|
|
Outstanding balance
|
|
|
48,548,836.84
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
48,548,836.84
|
|
|
|
|
|
BNDES Direct TJLP OI
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
128,299,255.09
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
128,299,255.09
|
|
|
|
|
|
PRIVATE DEBENTURE (CREDITOR: OI)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
4,001,070,650.34
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
4,001,070,650.34
|
|
|
|
|
|
PRIVATE DEBENTURE (CREDITOR: BRT CELULAR)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
2,055,843,794.61
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
2,055,843,794.61
|
|
|
|
|
|
PRIVATE DEBENTURE (CREDITOR: COPART 4)
|
|
|
|
|
|
|
|
|
Outstanding balance
|
|
|
1,016,994,273.20
|
|
|
Transaction costs to appropriate
|
|
|
—
|
|
|
Total balance of related hedges
|
|
|
—
|
|
|
|
|
|
Total indebtedness
|
|
|
1,016,994,273.20
|
|
|
|
|
|
Totals
|
|
|
|
|
|
Outstanding balance
|
|
|
15,856,396,145.38
|
|
|
Transaction costs to appropriate
|
|
|
(348,356,079.41
|
)
|
|
Total balance of related hedges
|
|
|
578,140,289.09
|
|
|
|
|
|
Total indebtedness
|
|
|
16,086,180,355.06
|
|
ATTACHMENT 3
ABL - Gross Leasable Area
ABNT - Brazilian Technical Standards Association
Allocated Codes - serial number (grades or
weights) to differentiate the quality features of properties.
Allotment - subdivision of a tract of land into lots for buildings with the
opening of new thoroughfares, or the extension, modification or expansion of existing ones.
Amortization - systematic allocation of the
depreciable value of an asset over its useful life.
Apparent Age - estimated age of a property according to its characteristics and
conservation status at the time of inspection.
Asset - a resource controlled by the entity as a result of past events from which future
economic benefits are expected for the entity.
Asset Approach - valuation of companies where all assets (including those not accounted for)
have their values adjusted to the market. Also known as market net equity.
Base Date - specific date (day, month and year) of application of
the assessment value.
Basic Infrastructure - urban rainwater drainage equipment, street lighting, sewage system, drinking water, public and
home electricity supply and access routes.
BDI - a percentage that indicates the benefits and overhead costs applied to the direct cost of
construction.
Best Use of the Property - the most economically appropriate use of a certain property according to its characteristics and
surroundings, respecting legal limitations.
Beta - a systematic risk measure of a share; price trend of a particular share to be correlated with
changes in a given index.
Book Value - the value at which an asset or liability is recognized on the balance sheet.
Building Standard - the quality of the improvements according to the specifications of design, materials, workmanship and performance effectively used in
construction.
Business Combination - union of separate entities or businesses producing financial statements of a single reporting entity.
Transaction or other event by which an acquirer obtains control of one or more businesses, regardless of the legal form of operation.
Business Risk - uncertainty of realization of expected future returns of the business resulting from factors other than financial leverage.
CAPEX (Capital Expenditure) - fixed asset investments.
Capitalization - conversion of a simple period of economic benefits into value.
CAPM (Capital
Asset Pricing Model) - model in which the capital cost for any share or lot of shares equals the risk free rate plus risk premium provided by the systematic risk of the share or lot of shares under investigation. Generally used to calculate the Cost
of Equity or the Cost of Shareholder Capital.
Capitalization Rate - any divisor used to convert economic benefits into value in a single
period.
Capital Structure - composition of a company’s invested capital, between own capital (equity) and third-party capital (debt).
Cash Flow - cash generated by an asset, group of assets or business during a given period of time. Usually the term is supplemented by a
qualification referring to the context (operating, non-operating, etc...).
Cash Flow on Invested Capital - cash flow generated by the company to be reverted to lenders (interest and
amortizations) and shareholders (dividends) after consideration of cost and operating expenses and capital investments.
Cash-Generating Unit
- smallest identifiable group of assets generating cash inflows that are largely independent on inputs generated by other assets or groups of assets.
Casualty - an event that causes financial loss.
Company - commercial or industrial entity,
service provider or investment entity holding economic activities.
Conservation Status - physical status of an asset in result of its
maintenance.
Control - power to direct the strategic policy and administrative management of a company.
Control Premium - value or percentage of the pro-rata value of a lot of controlling shares over the pro-rata value of non-controlling shares, which
reflect the control power.
Cost - the total direct and indirect costs necessary for production, maintenance or acquisition of an asset at a
particular time and situation.
Cost of Capital - Expected rate of return required by the market as an attraction to certain investment funds.
CPC - Accounting Pronouncements Committee.
Current Value - value replacement with a new value depreciated as a result of the physical state the property is in.
CVM - Securities and Exchange Commission.
Damage - damage caused to others by the occurrence of flaws, defects, accidents and crimes, among others.
Data Treatment - application of operations to express, in relative terms, the attribute differences between the market data and data of the property being assessed.
Date of Issue - closing date of the valuation report, when conclusions are conveyed to the client.
DCF (Discounted Cash Flow) - discounted cash flow.
D & A - depreciation and amortization.
Dependent Variable - variable to be explained by the
independent ones.
Depreciable Value - cost of the asset, or other amount that substitutes such cost (financial statements), less its residual
value
Depreciation - systematic allocation of the depreciable value of an asset during its useful life.
Dichotomous Variable - variable that assumes only two values.
Direct Production Cost - spending on inputs, including labor, in the production of goods.
Discount for Lack of Control - value or percentage deducted from the pro-rata value of 100% of the value of a company that reflects the absence of part
or all of the control.
Discount for Lack of Liquidity - value or percentage deducted from the pro-rata value of 100% of the value
of a company that reflects the lack of liquidity.
Discount Rate - any divisor used to convert a flow of future economic benefits into present
value.
Drivers - value drivers or key variables.
EBIT (Earnings before Interest and Taxes) - earnings before interest and taxes.
EBITDA (Earnings
before Interest, Taxes, Depreciation and Amortization) - earnings before interest, taxes, depreciation and amortization.
Economic Benefits -
benefits such as revenue, net profit, net cash flow, etc.
Efficient Use - that which is recommendable and technically possible for the
location on a reference date, among the various uses permitted by the applicable law, observing surrounding marketing trends.
Electrical
Damage Value - estimated cost of the repair or replacement of parts, when the property suffers electrical damage. Values are tabulated in percentages of the Replacement Value and have been calculated through the study of equipment manuals and the
expertise in corrective maintenance of Apsis technicians.
Enterprise - set of properties capable of producing revenue through marketing or
economic exploitation. It can be: real estate (e.g. subdivision, commercial / residential buildings), real-estate based (e.g., hotel, shopping mall, theme parks), industrial or rural.
Enterprise Value - economic value of the company.
Equity Value - economic value of the equity.
Equivalent Construction Area - constructed area on which the unit cost equivalence of corresponding construction is applied, according to
ABNT postulates.
Equivalent Depth - numerical result of the division of a lot area by its main projected front.
Expertise - technical activity performed by a professional with specific expertise to investigate and clarify facts, check the status of property,
investigate the causes that motivated a particular event, appraise assets, their costs, results or rights.
Facilities - set of materials,
systems, networks, equipment and operational support services for a single machine, production line or plant, according to the degree of aggregation.
Fair Market Value - value at which an asset could have its ownership exchanged between a potential seller and a potential buyer, when both parties have reasonable knowledge of relevant facts and neither
is under pressure to do so.
Fair Value Less Cost to Sell - value that can be obtained from the sale of an asset or cash-generating unit less
sale expenses, in a transaction between knowledgeable, willing and uninterested parties.
FCFF (Free Cash Flow to Firm) - Free cash flow to
firm, or unlevered free cash flow.
Financial Lease - that which substantially transfers all the risks and benefits related to the ownership
of the asset, which may or may not eventually be transferred. Leases that are not financial leases are classified as operating leases.
Fixed
Asset - tangible asset available for use in the production or supply of goods or services, in third-party leasing, investments, or for management purposes, expected to be used for more than one accounting period.
Flaw - anomaly that affects the performance of products and services, or makes them inadequate to the purposes intended, causing inconvenience or
material loss to the consumer.
Forced Liquidation - condition on the possibility of a compulsory sale or in a shorter period than the
average absorption by the market.
Free Float - percentage of outstanding shares on the company’s total capital.
Frontage - horizontal projection of the line dividing the property and the access road; measurement of the front of a building.
Goodwill - see Goodwill based on the expectation of future profitability (goodwill).
Homogenization - treatment of observed prices by application of mathematical transformations that express, in relative terms, the differences between market data attributes and those of the property
assessed.
Homogenized Area - useful or private area, or built with mathematical treatments for valuation purposes, according to criteria
based on the real estate market.
IAS (International Accounting Standards) - International Accounting Standards.
IASB (International Accounting Standards Board) - International Accounting Standards Board.
Ideal Fraction - percentage owned by each of the buyers (tenants) of the land and of the building’s common items.
IFRS (International Financial Reporting Standards) - International Financial Reporting Standards, a set of international accounting pronouncements published and reviewed by the IASB.
Impairment - see Losses on devaluation
Impairment Losses (impairment) - book value of the asset that exceeds, in the case of
stocks, its selling price less the cost to complete it and expense of selling it; or, in the case of other assets, their fair value less expenditure for sale.
Income Approach - valuation method for converting the present value of expected economic benefits.
Independent Variables - variables that provide a logical content to the formation of the value of the property subject to the assessment.
Indirect Production Cost - administrative and financial costs, benefits and other liens and charges necessary for the production of goods.
Influence Point - atypical point that, when removed from the sample, significantly changes the estimated parameters or the linear structure of the model.
Insurance - risk transfer guaranteed by contract whereby one party undertakes, subject to payment of premium, to indemnify another for the
occurrence of casualties covered under the policy.
Insurance Value - value at which an insurance company assumes the risks, and does not
apply to the land and foundations, except in special cases.
Intangible Asset - identifiable non-monetary asset without physical substance.
This asset is identifiable when: it is separable, i.e., capable of being separated or divided from the entity and sold, transferred, licensed, leased or exchanged, either alone or together with the related contract, asset or liability; or originates
from contractual rights or other legal rights regardless of their being transferred, separable from the entity or from other rights and obligations.
Internal Rate of Return - discount rate where the present value of future cash flow is equivalent to the cost of investment.
International Accounting Standards - standards and interpretations adopted by the IASB. They include:
International Financial Reporting Standards (IFRS) International Accounting Standards (IAS) and interpretations developed by the Interpretation Committee on International Financial Reporting Standards (IFRIC) or by the former Standing
Interpretations Committee (SIC).
Invested Capital - the sum of own capital and third-party capital invested in a company. Third-party capital
is usually related to debt with interest (short and long-term) and must be specified within the context of the valuation.
Investment Property
- property (land, building or building part, or both) held by the owner or lessee under the lease, both to receive payment of rent and for capital appreciation or both, other than for: use in the production or supply of goods or services, as well as
for administrative purposes.
Investment Value - value for a particular investor based on individual interests in the property in question. In
the case of business valuation, this value can be analyzed by different situations, such as the synergy with other companies of an investor, risk perceptions, future performance and tax planning.
Key Money - amount paid by the prospective tenant for signature or transfer of the lease contract, as compensation for the point of sale.
Key Variables - variables that, a priori, and traditionally have been important for the formation of property value.
Levered Beta - beta value reflecting the debt in capital structure.
Liability - present obligation that arises from past events, whereby it is hoped that the settlement thereof will result in the inflow of funds from the entity embodying economic benefits.
Liquidation Value - value of a property offered for sale on the market outside the normal process, i.e. one that would be established if the property
were offered for sale separately, taking into account the costs involved and the discount required for a sale in a reduced period.
Liquidity
- ability to rapidly convert certain assets into cash or into the payment of a certain debt.
Market Approach - valuation method in which
multiple comparisons derived from the sales price of similar assets are adopted.
Market Data - set of information collected on the market
related to a particular property.
Marketing Factor - the ratio between the market value of an asset and its reproduction cost less
depreciation or replacement cost, which may be higher or lower than 1 (one).
Market Research - set of activities for identification, investigation, collection, selection, processing,
analysis and interpretation of results on market data.
Maximum Insurance Value - maximum value of the property for which it is recommendable
to insure it. This criterion establishes that the property whose depreciation is greater than 50% should have its Maximum Insurance Value equivalent to twice as much as the Current Value; and the property whose depreciation is with less than 50%
should have its Maximum Insurance Value equivalent to the Replacement Value.
Multiple - market value of a company, share or invested capital,
divided by a valuation measurement of the company (EBITDA, income, customer volume, etc...).
Net Debt - cash and cash equivalents, net
position in derivatives, short-term and long-term financial debts, dividends receivable and payable, receivables and payables related to debentures, short-term and long-term deficits with pension funds, provisions, and other credits and obligations
to related parties, including subscription bonus.
Non-Operating Assets - those not directly related to the company’s operations (may or may not generate
revenue) and that can be disposed of without detriment to its business.
Null hypothesis in a regression model - hypothesis in which one or a
set of independent variables involved in the regression model are not important to explain the variation of the phenomenon in relation to a pre-established significance level.
Operating Assets - assets that are basic to the company’s operations.
Operating Lease -
that which does not substantially transfer all the risks and benefits incidental to the ownership of the asset. Leases that are not operating leases are classified as financial leases.
Parent Company - an entity that has one or more subsidiaries.
Perpetual Value - value at the end
of the projective period to be added on the cash flow.
Point of Sale - intangible asset that adds value to commercial property, due to its
location and expected commercial exploitation.
Population - total market data of the segment to be analyzed.
Premium for Expected Future Profitability (goodwill) - future economic benefits arising from assets not capable of being individually identified or
separately recognized.
Present Value - the estimated present value of discounted net cash flows in the normal course of business.
Price - the amount by which a transaction is performed involving a property, a product or the right thereto.
Private Area - useful area plus building blocks (such as walls, pillars, etc.) and elevator hallway (in
specific cases).
Property - something of value, subject to use, or that may be the object of a right, which integrates an equity.
Qualitative Variables - variables that cannot be measured or counted, only ordered or ranked, according to attributes inherent to the property (e.g.,
building standard, conservation status and quality of the soil).
Quantitative Variables - variables that can be measured or counted (e.g.,
private area, number of bedrooms and parking spaces).
Range for Real Estate Valuations - range in the vicinity of the point estimator adopted
in the valuation within which to arbitrate the value of the property provided it is justified by the existence of features that are not contemplated in the model.
Re (Cost of Equity) - return required by shareholders for the capital invested.
Real Estate -
property, consisting of land and any improvements incorporated thereto. Can be classified as urban or rural, depending on its location, use or to its highest and best use.
Recoverable Value - the highest fair value of an asset (or cash-generating unit) minus the cost of sales compared with its value in use.
Rd (Cost of Debt) - a measure of the amount paid for the capital earned from third parties, in the form of loans, financing, market funding, among others.
Reference Real Estate - market data with features comparable to the property assessed.
Regression Model - the model used to represent a specific phenomenon, based on a sample, considering the
various influencing characteristics.
Remaining Life - Property’s remaining life.
Replacement Cost - a property’s reproduction cost less depreciation with the same function and features comparable to the property assessed.
Replacement Value for New - value based on what the property would cost (usually in relation to current market prices) to be replaced with or
substituted by a new, equal or similar property.
Reproduction Cost - expense required for the exact duplication of a property, regardless of
any depreciation.
Reproduction Cost Less Depreciation - a property’s reproduction cost less depreciation, considering the state it is
in.
Residual Value - value of new or used asset projected for a date limited to that in which it becomes scrap, considering its being in
operation during the period.
Residual Value of an Asset - estimated value that the entity would obtain at present with the sale of the asset,
after deducting the estimated costs thereof, if the asset were already at the expected age and condition at the end of its useful life.
Sample - set of market data representative of a population.
Scrap Value - market value of a property’s reusable materials in disabling conditions, without their being used for production purposes.
Shareholders’ Equity at Market Prices - see Assets Approach.
Statistical Inference - part
of statistical science that allows drawing conclusions about the population from a sample.
Subsidiary - entity, including that with no legal
character, such as an association, controlled by another entity (known as the parent company).
Supporting Documentation - documentation
raised and provided by the client on which the report premises are based.
Survey - evidence of local events through insightful observations
in a property and of the factors and conditions that constitute or influence it.
Tangible Asset - physically existing asset, such as land,
building, machinery, equipment, furniture and tools.
Technical Report - detailed report or technical clarification issued by a legally
qualified
and trained professional on a specific subject.
Total Construction Area - resulting
from the sum of the real private area and the common area allocated to an independent unit, defined according to ABNT.
Urbanizable Land -
land eligible to receive urban infrastructure works aiming at its efficient use, by means of the subdivision, split or implementation of a business.
Useful Area - real private area subtracted from the area occupied by walls and other building blocks that prevent or hinder its use.
Useful Economic Life - the period in which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset by the entity.
Valuation - act or process of determining the value of an asset.
Valuation Methodology - one or more approaches used in developing evaluative calculations for the indication of the value of an asset.
Value at Risk - representative value of the share of the property one wishes to insure and that may correspond to the maximum insurable value.
Value in Use - value of a property in operating conditions in its present state, such as the useful part of an industry, including, where
relevant, the costs of design, packaging, taxes, freight and installation.
Value Plan - the graphic representation or listing of generic
square meter values of land or of the real estate on the same date.
WACC (Weighted Average Cost of Capital) - model in which capital cost is
determined by the weighted average of the market value of capital structure components (own and others).
Annex 4.2
Net Worth Appraisal Report
At Market Prices
|
|
|
|
|
REPORT:
|
|
RJ-0375/11-06
|
|
|
|
|
BASE DATE:
|
|
June 30, 2011
|
|
|
|
|
REQUESTING PARTY:
|
|
BRASIL TELECOM S.A.,
with its head office located at Rua General Polidoro, No. 99, 5º andar (parte), in Botafogo, in the
city and state of Rio de Janeiro, registered with the General Roster of Corporate Taxpayers (CNPJ) under number 76.535.764/0001-43, hereinafter referred to as
BRT
; and
COARI PARTICIPAÇÕES S.A.,
with its head office located at Rua
Humberto de Campos, No.425, 8º andar (parte), Leblon, in the city and state of Rio de Janeiro, registered with the General Roster of Corporate Taxpayers (CNPJ) under number 04.030.087/0001-09, hereinafter referred
COARI.
|
|
|
|
|
OBJECT:
|
|
BRT
and
COARI
, as described above.
|
|
|
|
|
PURPOSE:
|
|
Calculation of the Net Equity of both BRT and COARI, following the appraisal of the equity of each of these companies pursuant to the same criteria and as of the same date, at
market prices, for the purposes of article 264 of Law No. 6,404 of 12/15/1976 (Corporate Law).
|
EXECUTIVE SUMMARY
APSIS CONSULTORIA EMPRESARIAL Ltda. (“APSIS”) was hired by BRT and COARI to calculate the Net Equity of each of BRT and COARI, following the appraisal of the equity of each of these companies
pursuant to the same criteria and as of the same date, at market prices, for the purposes of article 264 of Law No. 6,404 of 12/15/1976 (Corporate Law).
The technical procedures used in this report are in accordance with the criteria set forth by appraisal standards. Appraisal calculations to assess the value of assets were devised on the basis of the
income, asset and market approaches.
This report presents the market values of the companies’ assets and liabilities used to adjust the
book Net Equity of each of BRT and COARI through asset approaches.
CORPORATE RESTRUCTURING OF OI GROUP: SUMMARY OF THE TRANSACTION
As described in the Statement of Material Fact published on May 24, 2011, Tele Norte Leste Participacoes SA (“TNL”), Telemar Norte Leste
SA (“Telemar”), Coari Participações SA (“Coari”) and Brasil Telecom SA (“BRT”), hereinafter together referred to as the OI COMPANIES, will implement a corporate restructuring (the “Corporate
Restructuring”) including the share exchange between TMAR and Coari and the mergers of Coari and TNL into BRT. As a result of the Corporate Restructuring, all current shareholders of the OI COMPANIES will become shareholders of BRT, which will
change its name to OI S.A. and will be the only one of the OI COMPANIES listed on a stock market.
The charts below show the simplified
corporate structure before and after the implementation of the Corporate Restructuring:
The following are the main steps of the Corporate Restructuring considered for adjustment in the financial
statements of the OI COMPANIES:
|
|
1.
|
Issuance and Redemption of shares by BRT;
|
|
|
2.
|
Share Exchange between TMAR and Coari;
|
|
|
3.
|
Merger of Coari into BRT;
|
|
|
4.
|
Merger of TNL into BRT.
|
SUMMARY OF RESULTS
The tables below present an overview of the Net Equity at market prices of the companies involved in the merger of COARI into BRT, as of the base date of this report:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASIL TELECOM S.A.(BRT)
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE AS
OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
7,162,456
|
|
|
|
-1,501,984
|
|
|
|
5,660,472
|
|
|
|
-105,381
|
|
|
|
5,555,091
|
|
|
LONG TERM ASSETS
|
|
|
12,205,796
|
|
|
|
0
|
|
|
|
12,205,796
|
|
|
|
0
|
|
|
|
12,205,796
|
|
|
INVESTMENTS
|
|
|
8,265
|
|
|
|
0
|
|
|
|
8,265
|
|
|
|
0
|
|
|
|
8,265
|
|
|
FIXED ASSETS
|
|
|
5,435,464
|
|
|
|
0
|
|
|
|
5,435,464
|
|
|
|
5,108,535
|
|
|
|
10,543,999
|
|
|
INTANGIBLE ASSETS
|
|
|
1,187,676
|
|
|
|
0
|
|
|
|
1,187,676
|
|
|
|
0
|
|
|
|
1,187,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
25,999,657
|
|
|
|
-1,501,984
|
|
|
|
24,497,673
|
|
|
|
5,003,154
|
|
|
|
29,500,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
7,427,880
|
|
|
|
-1,501,984
|
|
|
|
5,925,896
|
|
|
|
0
|
|
|
|
5,925,896
|
|
|
NON-CURRENT LIABILITIES
|
|
|
8,269,903
|
|
|
|
0
|
|
|
|
8,269,903
|
|
|
|
1,701,072
|
|
|
|
9,970,975
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
303
|
|
|
|
0
|
|
|
|
303
|
|
|
|
97
|
|
|
|
400
|
|
|
EQUITY
|
|
|
10,301,571
|
|
|
|
0
|
|
|
|
10,301,571
|
|
|
|
3,301,985
|
|
|
|
13,603,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
25,999,657
|
|
|
|
-1,501,984
|
|
|
|
24,497,673
|
|
|
|
5,003,154
|
|
|
|
29,500,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued in the Corporate Restructuring.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COARI PARTICIPAÇÕES S.A.(COARI)
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE AS
OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(2)
|
|
|
SUBSEQUENT
EVENT
(3)
|
|
|
SUBSEQUENT
EVENT
(4)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS (1)
|
|
|
938,789
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
938,789
|
|
|
|
0
|
|
|
|
938,789
|
|
|
INVESTMENTS
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
25,545,114
|
|
|
|
5,186,582
|
|
|
|
30,731,696
|
|
|
- Investments in subsidiaries:
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
25,545,114
|
|
|
|
5,186,582
|
|
|
|
30,731,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
16,385,791
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
26,483,903
|
|
|
|
5,186,582
|
|
|
|
31,670,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
761
|
|
|
|
1,074,598
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,075,359
|
|
|
|
0
|
|
|
|
1,075,359
|
|
|
NON-CURRENT LIABILITIES
|
|
|
2,515
|
|
|
|
15,011,582
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,014,097
|
|
|
|
0
|
|
|
|
15,014,097
|
|
|
EQUITY
|
|
|
16,382,515
|
|
|
|
-16,086,180
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
10,394,447
|
|
|
|
5,186,582
|
|
|
|
15,581,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
16,385,791
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
26,483,903
|
|
|
|
5,186,582
|
|
|
|
31,670,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued in the Corporate Restructuring.
|
|
(2)
|
Incorporation of the portion of the shareholders' equity of TMAR which was split-off.
|
|
(3)
|
Represents the share exchange between TMAR and COARI.
|
|
(4)
|
Represents reversal of negative goodwill recorded as a result of the acquisition of Brasil Telecom in January 2009 for a purchase price which was less than the
book value of its assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VALUE ( THOUSAND REAIS )
|
|
|
|
|
BRT X COARI
|
|
|
RELEVANT
ACCOUNTS
|
|
PRO FORMA BALANCE
|
|
|
ADJUSTED BALANCE
|
|
|
|
BRT
|
|
|
COARI
|
|
|
BRT
|
|
|
COARI
|
|
|
ASSETS
|
|
|
24,497,673
|
|
|
|
52,029,017
|
|
|
|
29,500,827
|
|
|
|
62,402,181
|
|
|
CURRENT ASSETS
|
|
|
5,660,472
|
|
|
|
938,789
|
|
|
|
5,555,091
|
|
|
|
938,789
|
|
|
LONG TERM ASSETS
|
|
|
12,205,796
|
|
|
|
25,545,114
|
|
|
|
12,205,796
|
|
|
|
30,731,696
|
|
|
FIXED ASSETS
|
|
|
6,631,405
|
|
|
|
25,545,114
|
|
|
|
11,739,940
|
|
|
|
30,731,696
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
24,497,673
|
|
|
|
26,483,903
|
|
|
|
29,500,827
|
|
|
|
31,670,485
|
|
|
CURRENT LIABILITIES
|
|
|
5,925,896
|
|
|
|
1,075,359
|
|
|
|
5,925,896
|
|
|
|
1,075,359
|
|
|
LONG TERM LIABILITIES
|
|
|
8,269,903
|
|
|
|
15,014,097
|
|
|
|
9,970,975
|
|
|
|
15,014,097
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
303
|
|
|
|
0
|
|
|
|
400
|
|
|
|
0
|
|
|
EQUITY
|
|
|
10,301,571
|
|
|
|
10,394,447
|
|
|
|
13,603,556
|
|
|
|
15,581,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NUMBER OF SHARES
|
|
|
589,788,993
|
|
|
|
344,056,833
|
|
|
|
589,788,993
|
|
|
|
344,056,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R$ PER SHARE *
|
|
|
17.466537
|
|
|
|
30.211424
|
|
|
|
23.065123
|
|
|
|
45.286207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXCHANGE RATIO **
|
|
|
1.729675
|
|
|
|
|
|
|
|
1.963406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Adjusted to reflect the exclusion of treasury stock
|
|
**
|
Number of BRT shares for 1 COARI share
|
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
|
INTRODUCTION
|
|
|
9
|
|
|
|
|
|
|
|
|
|
2.
|
|
PRINCIPLES AND QUALIFICATIONS
|
|
|
10
|
|
|
|
|
|
|
|
|
|
3.
|
|
RESPONSIBILITY LIMITS
|
|
|
11
|
|
|
|
|
|
|
|
|
|
4.
|
|
APPRAISAL METHODOLOGY
|
|
|
12
|
|
|
|
|
|
|
|
|
|
5.
|
|
GENERAL APPRAISAL CRITERIA
|
|
|
14
|
|
|
|
|
|
|
|
|
|
6.
|
|
APPRAISAL OF THE NET EQUITY AT MARKET PRICE OF BrT
|
|
|
25
|
|
|
|
|
|
|
|
|
|
7.
|
|
APPRAISAL OF THE NET EQUITY AT MARKET PRICE OF COARI
|
|
|
29
|
|
|
|
|
|
|
|
|
|
8.
|
|
CONCLUSION
|
|
|
33
|
|
|
|
|
|
|
|
|
|
9.
|
|
ATTACHMENTS
|
|
|
34
|
|
1. INTRODUCTION
APSIS CONSULTORIA EMPRESARIAL Ltda. (APSIS) was appointed by BrT and COARI to calculate the Net Equity of each of BrT and COARI, following the appraisal of the equity of both companies pursuant to the
same criteria and as of the same date, at market prices, for the purpose of article 264 of Law No. 6,404 of 12/15/1976 (Corporate Law).
In preparing this report, data and information supplied by third parties were used, in the form of documents and verbal interviews with the clients. The
estimates used in this process are based on documents and information which include, among others, the following:
|
•
|
|
Bylaws or Articles of Incorporation of the companies;
|
|
•
|
|
Financial statements of the group’s companies;
|
|
•
|
|
Organization chart and corporate holdings;
|
|
•
|
|
List of permanent assets;
|
|
•
|
|
IAN (Annual Reports) and ITR (Quarterly Reports) of the companies;
|
|
•
|
|
Set of architectural plans;
|
|
•
|
|
Documents with technical specifications of the equipment appraised.
|
Inspections of the operational sites were conducted in March and April 2009.
The APSIS team responsible for the coordination and performance of this report consists of the following
professionals:
|
|
|
• AMILCAR DE CASTRO
sales director
• ANA CRISTINA FRANÇA DE SOUZA
civil engineer
post-graduated in Accouting Sciences (CREA/RJ 91.1.03043-4)
• BETINA DENGLER
project manager
• CESAR DE FREITAS SILVESTRE
accountant (CRC/RJ 44779/O-3)
• CLAUDIO MARÇAL DE FREITAS
accountant (CRC/RJ 55029/O-1)
• FLAVIO LUIZ PEREIRA
accountant (CRC/RJ 022016-O-9)
• LUIZ PAULO CESAR SILVEIRA
mechanical engineer
máster of business management (CREA/RJ 89.1.00165-1)
• MARGARETH GUIZAN DA SILVA OLIVEIRA
civil engineer (CREA/RJ 91.1.03035-3)
• RICARDO DUARTE CARNEIRO MONTEIRO
civil engineer
post-graduated in economic engineering (CREA/RJ 30137-D)
• SÉRGIO FREITAS DE SOUZA
economist (CORECON/RJ 23521-0)
|
2. PRINCIPLES AND QUALIFICATIONS
This report strictly complies with the fundamental principles described below:
|
•
|
|
The professional fees of APSIS are not, in any way, subject to the conclusions of this report.
|
|
•
|
|
The report was prepared by APSIS and no one, other than the consultants themselves, prepared the analyses and respective conclusions.
|
|
•
|
|
In this report, it is assumed that the information received from third parties is correct, and the sources thereof are contained in this Report.
|
|
•
|
|
To the best knowledge and belief of the consultants, the analyses, opinions and conclusions presented in this Report are based on data, diligence,
research and surveys that are true and correct.
|
|
•
|
|
APSIS assumes full responsibility for the matter of Appraisal Engineering, including implicit appraisals, and for the exercise of its honorable duties,
primarily established in the applicable laws, codes or regulations.
|
|
•
|
|
For projection purposes, we start from the premise of the nonexistence of liens or encumbrances of any nature, whether judicial or extrajudicial,
affecting the object of the relevant work, other than those listed in this report.
|
|
•
|
|
This report meets the specifications and criteria established by the standards of the Brazilian Association of Technical Standards (ABNT), the
specifications and criteria established by USPAP (Uniform Standards of
|
|
|
|
Professional Appraisal Practice), in addition to the requirements imposed by different bodies, such as: the Treasury Department, the Central Bank of Brazil, CVM (the Brazilian Securities and
Exchange Commission), SUSEP (Private Insurance Superintendence), etc.
|
|
•
|
|
The report presents all the restrictive conditions imposed by the methodologies adopted, which affect the analyses, opinions and conclusions contained
in the same.
|
|
•
|
|
APSIS declares that neither it nor the consultants and appraisers have any direct or indirect interest in the companies contemplated in this Report, in
their respective controllers, or in the transaction to which the “Protocol and Justification” refers, there being no relevant circumstances which may characterize conflict or communion of interests, whether potential or actual, towards the
issuance of this Report.
|
|
•
|
|
In the course of our work, controllers and managers of the companies contemplated in this Report did not direct, limit, hinder or take any actions,
which have or may have compromised access, use or knowledge of information, property, documents or work methodologies relevant to the quality of our conclusions.
|
|
•
|
|
This Report was prepared in strict compliance with the postulates set forth in the Professional Code of Ethics of CONFEA - Federal Council of
Engineering, Architecture and Agronomy and of the Legal Institute of Engineering.
|
3. RESPONSIBILITY LIMITS
|
•
|
|
To prepare this report, APSIS used historic data and information, audited by third parties or unaudited, and projected unaudited data supplied in
writing or verbally by the companies’ management or obtained from the sources mentioned. Therefore, APSIS assumed as true the data and information obtained for this report and does not have any responsibility in connection with its
truthfulness.
|
|
•
|
|
The scope of this work did not include an audit of the financial statements or a revision of the work performed by the companies’ auditors.
|
|
•
|
|
Our work was developed for use by the applicant in connection with the previously described objectives. Therefore, it may be disclosed as part of the
documents related to the Corporate Restructuring, and the mention of this work in related publications is authorized. It may also be filed with the Brazilian Securities and Exchange Commission (the “CVM”) and with the U.S. Securities and
Exchange Commission (the “SEC”), as well as made available to shareholders and third parties, including through the websites of the involved companies.
|
|
•
|
|
We emphasize that understanding the conclusion of this report will require reading it and its attachments in full. Therefore, conclusions should not be
drawn from a partial reading.
|
|
•
|
|
We are not responsible for occasional losses to the applicant, its shareholders, directors, creditors or to other parties as a result of the use of
data and information supplied by the companies and contained in this Report.
|
|
•
|
|
The analyses and conclusions contained herein are based on several premises, held as of this date, of future operational projections, such as:
macroeconomic factors, values used in the market, exchange rate variations, sale prices, volumes, market share, revenues, taxes, investments, operational margins, etc. Thus, future results may differ from any forecast or estimate contained in this
Report.
|
|
•
|
|
This appraisal does not reflect events and their respective impacts, occurring after the date of issue of this Report.
|
4. APPRAISAL METHODOLOGY
ASSETS APPROACH - NET EQUITY AT MARKET PRICES
This methodology is derived from generally
accepted accounting principles (GAAP), where financial statements are prepared based on the principle of historic or acquisition cost.
Due to
this principle and to the fundamental principle of accounting, the book value of the assets of a company less the book value of its liabilities equals the book value of its net equity.
The application of this methodology contemplates, as a starting point, the book values of assets and liabilities and requires that some of these items be adjusted so as to reflect their probable
realization values. The result of the application of this method may provide an initial basis for the estimate of the company’s value, as well as a useful basis of comparison with results from other methodologies.
On the other hand, the basic principles of economics allow us to create the following appraisal technique: the value defined for assets less the value
defined for liabilities equals the value defined for a company’s net equity. From an appraisal perspective, the relevant value definitions are those appropriate to the purpose of the appraisal.
The assets approach, therefore, aims to appraise a company by adjusting the book value (net balance) to respective fair market values. The assets and
liabilities deemed relevant are appraised for their fair market value, with a comparison made between this value and its book value (net balance).
The general appraisal criteria applicable to the adjustment of assets subject to an appraisal at market
prices can be found in detail in Chapter 6 of this report.
After being duly analyzed, these adjustments are added to the book Net Equity
value, in this way determining the company’s market value through the assets approach. The company’s fair market value is the Net Equity value after giving effect to the adjustments of the assets and liabilities appraised.
It is worth noting that the identification and quantification of liabilities that were neither recorded nor
disclosed by the companies’ managements were not within the scope of our work.
The methodology and scope adopted in this assessment is
aimed at appraising the companies’ going concern values. Therefore, expenses incurred in asset realization or liability requirements, as well as related to the companies’ bankruptcy or liquidation processes, were not contemplated in the
calculations.
PRINCIPLE STEPS OF THE APPRAISAL
|
|
•
|
|
Reading and analysis of the companies’ balance sheets.
|
|
|
•
|
|
Analysis of asset and liability accounts recorded on the companies’ balance sheets, to identify accounts subject to adjustments, as well as
calculations of their probable market values.
|
|
|
•
|
|
Adjustment of the companies’ fixed assets in accordance with their respective market values on the basis of equity appraisals performed by Apsis.
|
|
|
•
|
|
Adjustment of relevant intangible operating assets in accordance with their respective market values, on the basis of premises and appraisal criteria
developed by Apsis.
|
|
|
•
|
|
Application of the equity method of accounting to the net equity at market value of subsidiary and affiliated companies for the purpose of calculating
the value of investments.
|
|
|
•
|
|
Calculation of the market value of the companies’ net equity.
|
5. GENERAL APPRAISAL CRITERIA
This report was prepared for the purpose of complying with current legislation in connection with the Corporate Restructuring, as described in the Executive Summary of this report.
EVENTS AND ADJUSTMENTS CONTEMPLATED IN THE APPRAISAL
The financial statements considered as the basis for this report were prepared by the companies, having already fully complied with Act No. 11. 638/07. The table below shows the general criteria
defined for the appraisal of each account and/or group of accounts of the companies involved in the operation.
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
General
|
|
Accounts whose value is less than R$500,000 reais were not analyzed; the book value was kept, with the exception of those that were consolidated in a specific group.
|
|
Market value identical to book value.
|
|
|
|
|
|
Available Funds
|
|
Represented by:
• Cash and Banks
• Cash Equivalents - Short-term investments, with original maturity being
ninety days or less and immediately convertible into cash;
• Financial Investments - Exclusive investment funds and private securities.
Cash equivalents and investments held by the Company and its subsidiaries are classified as held for trading and are
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
|
|
measured at their respective fair values.
|
|
|
|
|
|
|
|
Accounts Receivable from Clients
|
|
Substantially represented by:
• Services for billing
• Billed services
• Sales of Goods
• Provision for doubtful accounts constituted on the basis of individual
analyses and on the analyses of groups of assets of similar risk, for which criteria for establishing the provision contemplates the ascertainment of percentiles of losses occurring in each maturity range of accounts receivable and, on the grounds
of such loss percentiles, future losses are estimated over the current balance of accounts receivable.
|
|
Market value identical to book value.
|
|
|
|
|
|
Inventories
|
|
Substantially represented by cell phones and accessories for resale, net of provision for losses or for adjustments to the forecast in which they should be realized.
|
|
Market value identical to book value.
|
|
|
|
|
|
Derivatives
(Assets and Liabilities)
|
|
Represented by:
• “Swap cross currency” contracts US$/R$:
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
|
|
• Active Position - US$ + 5,86%
• Liability Position - 100% CDI
• “Swap cross currency” contracts Iene/R$:
• Active Position - Iene + Iene Libor 6M + 1,25%
• Liability Position - 85% a 90% CDI
• “Swap cross currency” contracts Iene/US$:
• Active Position - Iene Libor 6m + 1,25%
• Liability Position - US Libor 6m + 3,59%
Hedging operations contracted with financial institutions to minimize the risks of
loans and financing contracted in foreign currency, without leverage, because of the possibility of fluctuations in exchange rates that may increase the balance of them. Portion of foreign currency debt in foreign currency 90.4% is covered by this
mode of operation and financial investments in foreign currency.
The
positive or negative effects in hedging transactions are measured at fair value using available information and appropriate valuation methodologies for each situation.
|
|
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Deferred and Recoverable Taxes
|
|
Represented by:
• Deferred Income Tax and Social Contribution - Calculated over temporary
differences, tax losses and the negative base of social contribution, and accounted for to the extent of the existence of future taxable profit at sufficient level for the total or partial use of deferred taxes.
• Tax Credits - Composed of:
• ICMS (Provisional Value Added Tax)
• IRPJ/CS (Legal Entity Income Tax/Social
Contribution)
• PIS & COFINS (Social Participation Program and
Contribution to Social Security Financing)
• Others
The ICMS recoverable originates, for the most part, from credits constituted on the acquisition of fixed assets - Complementary Law No. 102/00.
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Judicial Deposits
|
|
Represented by the balance of judicial deposits related to contingencies, which the balances are updated monetarily. The deposits are in
connection with the following contingencies:
• Labor
• Tax
• Civil
|
|
Market value identical to book value.
|
|
|
|
|
|
Assets Related to Pension Funds
|
|
Represented by:
• Contribution of the sponsor without right of redemption by the
participants who left the Plan.
• Part of the Plan’s surplus, attributed to the
sponsor.
|
|
Market value identical to book value.
|
|
|
|
|
|
Available Financial Assets for Sale
|
|
Represented by the participation of 7.2% of TMAR in Portugal Telecom’s capital resulting from the acquisition of stake by
subscribing for the purchase and sale of shares to term.
The investment
was recorded under this heading, as required by the CPC 38.
|
|
Market value identical to book value.
|
|
|
|
|
|
Others
|
|
Substantially represented by:
|
|
• Prepaid Expenses - The balance of
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
|
|
• Prepaid Expenses
• Advances to Suppliers
• Receivables
• Advances to Employees
• Fiscal Benefits
• Other Assets
|
|
the following prepaid expenses were cancelled:
• Publicity and Advertisement
• Sponsor
• Financial charges
• FOL
• Directories
• FISTEL
• Others
• Other Assets: Maintained the book value taking in consideration that
this asset was measured at its fair value.
|
|
|
|
|
|
Participation in Subsidiary Companies
|
|
Appraised through the Equity Method of Accounting.
|
|
Balances were adjusted by the results of market value adjustments reflected in the net equities of the subsidiaries appraised.
|
|
|
|
|
|
Other Investments
|
|
Represented by other investments whose balances are stated net of provision for loss when applicable.
|
|
Market value identical to book value.
|
|
|
|
|
|
Automatic Commutation Equipment, Means of Data Communication and Transmission, Termination and
|
|
Assets of utmost importance for the business. Appraised at market prices on the basis of their replacement cost through the use of project parameters. Methodology and
respective
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Infrastructure
|
|
calculations can be found in detail in Attachment 2.
|
|
|
|
|
|
|
|
Land and Buildings
|
|
Appraised at market prices, with specific appraisal reports for applicable properties. A table comprising the summary of values per property can be found in Attachment
3.
|
|
Market value identical to book value.
|
|
|
|
|
|
Work in Progress
|
|
Assets whose book value is close to their market value, due to their being recent acquisitions.
|
|
Market value identical to book value.
|
|
|
|
|
|
Goodwill Surplus Value
|
|
Goodwill determined in subsidiaries not valued.
|
|
Market value identical to book value.
|
|
|
|
|
|
Intangible
|
|
Represented by:
• Goodwill in subsidiaries not valued
• Data Processing System
• Formation of Intangibles
• Others
• Patents and Brands
• Regulatory Licenses
|
|
For purposes of compliance with article 264 of the Lei das S / A, the analyst chose the values of historical cost as the best reference, in order to remove the influence of the
projections of future scenarios present in the traditional methodologies of valuation at market prices of this group of assets.
|
|
|
|
|
|
Loans, Financing, Debentures, Derivative Financial Instruments and
|
|
Represented by:
• Financial Institutions:
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Intercompany Loans
|
|
• Local Currency
• Foreign Currency
• Financial and Derivative Instruments
• Public Debentures
|
|
|
|
|
|
|
|
Suppliers
|
|
Substantially represented by:
• Network Infrastructure Material
• Transfers
• Commissions on sales
• Diverse Suppliers
The payments end in the short-term for all obligations.
|
|
Market value identical to book value.
|
|
|
|
|
|
Taxes, Fees and Contributions
|
|
Represented by:
• ICMS (1) (Provisional Value Added Tax)
• PIS and COFINS (Social Participation Program and
Contribution)
• IRPJ (Legal Entity Income Tax) payable
• Social Contribution payable
• Others
|
|
Maintained the book value, because it did not show signs of relevant market adjustments, except for the IR / CS, for which the balance was adjusted for the effects of income tax and
social contribution levied on adjustments to the market subject to such taxation.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Staff, Social Charges and Benefits
|
|
Substantially represented by:
• Social Charges and Benefits
• Share Option Plan
• Others
|
|
Market value identical to book value.
|
|
|
|
|
|
Authorization for Exploration of Services
|
|
Substantially represented by payable values to ANATEL for grants of radiofrequency and authorization of services from SMP and concession of STFC, obtained through
auctions.
|
|
Market value identical to book value.
|
|
|
|
|
|
Dividends, On Shareholders Equity Interest and Share of Net Income
|
|
Represented by dividends and interest on shareholders’ equity net of withholding Income tax when applicable, payable to controlling and non-controlling
shareholders.
|
|
Market value identical to book value.
|
|
|
|
|
|
Refinancing Tax Program
|
|
• Referred to the values of the installments (REFIS 4)
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Provision for Contingencies
|
|
Represented by the balance of provisions for Labor, Tax and Civil contingencies whose risks are classified as PROBABLE, net of judicial
deposits and made on the grounds of legal requirements or caution.
In the
appraisal of the company and its subsidiaries, contingencies classified pursuant to their chances of being incurred at a POSSIBLE or REMOTE risk level, are not provisioned, albeit, in some cases, similar matters may be framed in different risk-level
classifications, a fact which has been justified by the peculiar factual and procedural status of each process. However, in some situations, judicial deposits are made on the grounds of legal requirements or caution.
|
|
Market value identical to book value.
|
|
|
|
|
|
Provision for Pension Funds and Other Benefits
|
|
Substantially represented by the company’s and its subsidiaries’ sponsoring of complementary social security benefit plans,
relative to retirement benefits for assisted employees and participants.
For defined benefit plans, the Company and its subsidiaries have the
immediate recognition of actuarial gains and losses, being made the full liabilities for plans showing deficits.
|
|
Market value identical to book value.
|
|
|
|
|
|
|
|
ACCOUNT GROUP
|
|
PREMISES
|
|
APPRAISAL CRITERIA
|
|
Other Accounts Payable
|
|
Substantially represented by :
• Tax Credit Acquisition Obligations
• Self-financing Resources
• Other accounts payable
|
|
Market value identical to book value.
|
|
|
|
|
|
Net Equity
|
|
•
Adjustments at Market Value
- Resulting from the appraisal of Assets, Rights and
Obligations, appraised at market value, net of tax effects.
|
|
Adjusted by the premium paid for the valued assets net of taxes.
|
6. APPRAISAL OF THE NET EQUITY AT MARKET PRICE OF BRT
This report uses the assets approach for the appraisal of the Net Equity at market price of BRT. In this approach, relevant assets and liabilities were
appraised so as to reflect their fair market value, according to the criteria detailed in Chapter 5.
RELEVANT ASSETS
To arrive at the value of the Consolidated Net Equity at market prices of BRT, it was necessary to appraise BRT’s relevant operating assets as they
would exist following the issuance and redemption of the redeemable preferred shares of BRT.
FIXED ASSETS
Property that integrates the fixed assets relating to equipment accounts are of the utmost relevance among the set of BRT’s assets. Land and buildings are assets of secondary importance within the
telephony segment. Appraisal of these assets can be found in Attachment 2 hereof and in specific reports for the main real estate, and is summarized on the following table:
FIXED TELEPHONY’S FIXED ASSETS - REGION II
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
705,666,601.08
|
|
|
Transmission equipments
|
|
|
3,787,824,100.80
|
|
|
Work in progress
|
|
|
398,512,264.36
|
|
|
Infrastructure
|
|
|
2,622,685,901.28
|
|
|
Buildings
|
|
|
924,269,552.40
|
|
|
Other assets
|
|
|
286,792,110.19
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
8,725,750,530.11
|
|
|
|
|
|
|
|
MOBILE’S FIXED ASSETS - REGION II
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
259,300,159.23
|
|
|
Transmission equipments
|
|
|
1,028,946,323.56
|
|
|
Work in progress
|
|
|
150,088,047.46
|
|
|
Infrastructure
|
|
|
140,755,529.12
|
|
|
Buildings
|
|
|
425,402,887.50
|
|
|
Other assets
|
|
|
124,030,264.31
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
2,128,523,211.19
|
|
|
|
|
|
|
|
APPRAISAL OF OTHER ASSETS AND LIABILITIES
For other assets and liabilities of BRT, we used the criteria specified in Chapter 5, as shown on the calculation spreadsheets of Attachment 1.
VALUE OF THE NET EQUITY AT MARKET PRICE OF BRT
The table below shows the value of the Net Equity at Market Price of BRT as of the base date, with respective adjustments made in the main accounts,
considering the subsequent events this report:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASIL TELECOM S.A.(BRT)
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE AS
OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS
|
|
|
7,162,456
|
|
|
|
-1,501,984
|
|
|
|
5,660,472
|
|
|
|
-105,381
|
|
|
|
5,555,091
|
|
|
LONG TERM ASSETS
|
|
|
12,205,796
|
|
|
|
0
|
|
|
|
12,205,796
|
|
|
|
0
|
|
|
|
12,205,796
|
|
|
INVESTMENTS
|
|
|
8,265
|
|
|
|
0
|
|
|
|
8,265
|
|
|
|
0
|
|
|
|
8,265
|
|
|
FIXED ASSETS
|
|
|
5,435,464
|
|
|
|
0
|
|
|
|
5,435,464
|
|
|
|
5,108,535
|
|
|
|
10,543,999
|
|
|
INTANGIBLE ASSETS
|
|
|
1,187,676
|
|
|
|
0
|
|
|
|
1,187,676
|
|
|
|
0
|
|
|
|
1,187,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
25,999,657
|
|
|
|
-1,501,984
|
|
|
|
24,497,673
|
|
|
|
5,003,154
|
|
|
|
29,500,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
7,427,880
|
|
|
|
-1,501,984
|
|
|
|
5,925,896
|
|
|
|
0
|
|
|
|
5,925,896
|
|
|
NON-CURRENT LIABILITIES
|
|
|
8,269,903
|
|
|
|
0
|
|
|
|
8,269,903
|
|
|
|
1,701,072
|
|
|
|
9,970,975
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
303
|
|
|
|
0
|
|
|
|
303
|
|
|
|
97
|
|
|
|
400
|
|
|
EQUITY
|
|
|
10,301,571
|
|
|
|
0
|
|
|
|
10,301,571
|
|
|
|
3,301,985
|
|
|
|
13,603,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
25,999,657
|
|
|
|
-1,501,984
|
|
|
|
24,497,673
|
|
|
|
5,003,154
|
|
|
|
29,500,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued in the Corporate Restructuring.
|
VALUE OF BRT SHARES, AS OF THE BASE DATE, AFTER GIVING EFFECT TO THE PREVIOUS STEPS OF THE CORPORATE
RESTRUCTURING
|
|
|
|
|
|
|
344,056,834 shares
|
|
|
VALUE PER SHARE
|
|
|
Book equity value *
|
|
R$
|
17.466537
|
|
|
Adjustment per share
|
|
R$
|
5.598586
|
|
|
Equity value adjusted at market price (1)
|
|
R$
|
23.065123
|
|
|
(1)
|
Adjusted to reflect the exclusion of treasury stock
|
7. APPRAISAL OF THE NET EQUITY AT MARKET PRICE OF COARI
This report uses the assets approach for the appraisal of the Net Equity at market price of COARI. In this approach, relevant assets and liabilities were
appraised so as to reflect their fair market value, according to the criteria detailed in Chapter 5
RELEVANT ASSETS
As part of the Corporate Restructuring, TMAR and BRT will both be subsidiaries of COARI, immediately before the merger of COARI into BRT, as shown in the
table below:
Therefore, to arrive at the value of the Consolidated Net Equity at market prices of COARI, it was
necessary to appraise COARI’s relevant operating assets as they would exist following the share exchange between TMAR and COARI.
FIXED ASSETS
Property that integrates
the fixed assets relating to equipment accounts are of the utmost relevance among the set of BRT’s assets. Land and buildings are assets of secondary importance within the telephony segment. Appraisal of these assets can be found in Attachment
2 hereof and in specific reports for the main real estate, and is summarized on the following table:
FIXED TELEPHONY’S FIXED ASSETS -
REGION I
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
1,511,906,627.38
|
|
|
Transmission equipments
|
|
|
4,464,811,214.12
|
|
|
Work in progress
|
|
|
1,512,792,427.58
|
|
|
Infrastructure
|
|
|
4,483,295,564.03
|
|
|
Buildings
|
|
|
973,880,035.98
|
|
|
Other assets
|
|
|
347,771,009.25
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
13,294,456,878.34
|
|
|
|
|
|
|
|
FIXED TELEPHONY’S FIXED ASSETS - REGION II
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
705,666,601.08
|
|
|
Transmission equipments
|
|
|
3,787,824,100.80
|
|
|
Work in progress
|
|
|
398,512,264.36
|
|
|
Infrastructure
|
|
|
2,622,685,901.28
|
|
|
Buildings
|
|
|
924,269,552.40
|
|
|
Other assets
|
|
|
286,792,110.19
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
8,725,750,530.11
|
|
|
|
|
|
|
|
MOBILE’S FIXED ASSETS - REGION I and III
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
1,007,002,880.05
|
|
|
Transmission equipments
|
|
|
2,911,725,900.48
|
|
|
Work in progress
|
|
|
464,795,248.99
|
|
|
Infrastructure
|
|
|
1,044,996,518.31
|
|
|
Buildings
|
|
|
136,214,216.09
|
|
|
Other assets
|
|
|
271,628,254.91
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
5,836,363,018.82
|
|
|
|
|
|
|
|
MOBILE’S FIXED ASSETS - REGION II
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
Automatic switching equipment
|
|
|
259,300,159.23
|
|
|
Transmission equipments
|
|
|
1,028,946,323.56
|
|
|
Work in progress
|
|
|
150,088,047.46
|
|
|
Infrastructure
|
|
|
140,755,529.12
|
|
|
Buildings
|
|
|
425,402,887.50
|
|
|
Other assets
|
|
|
124,030,264.31
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
2,128,523,211.19
|
|
|
|
|
|
|
|
APPRAISAL OF OTHER ASSETS AND LIABILITIES
For other assets and liabilities of COARI, we adopted the criteria specified in Chapter 5, as shown on the calculation spreadsheets of Attachment 1.
VALUE OF THE NET EQUITY AT MARKET PRICE OF COARI
The table below shows the value of the Net Equity at Market Price of COARI, as of the base date, with respective adjustments previously described:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COARI PARTICIPAÇÕES S.A.(COARI)
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE AS
OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(2)
|
|
|
SUBSEQUENT
EVENT
(3)
|
|
|
SUBSEQUENT
EVENT
(4)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS (1)
|
|
|
938,789
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
938,789
|
|
|
|
0
|
|
|
|
938,789
|
|
|
INVESTMENTS
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
25,545,114
|
|
|
|
5,186,582
|
|
|
|
30,731,696
|
|
|
- Investments in subsidiaries:
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
25,545,114
|
|
|
|
5,186,582
|
|
|
|
30,731,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
16,385,791
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
26,483,903
|
|
|
|
5,186,582
|
|
|
|
31,670,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
761
|
|
|
|
1,074,598
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,075,359
|
|
|
|
0
|
|
|
|
1,075,359
|
|
|
NON-CURRENT LIABILITIES
|
|
|
2,515
|
|
|
|
15,011,582
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,014,097
|
|
|
|
0
|
|
|
|
15,014,097
|
|
|
EQUITY
|
|
|
16,382,515
|
|
|
|
-16,086,180
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
10,394,447
|
|
|
|
5,186,582
|
|
|
|
15,581,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
16,385,791
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
26,483,903
|
|
|
|
5,186,582
|
|
|
|
31,670,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued in the Corporate Restructuring.
|
|
(2)
|
Incorporation of the portion of the shareholders' equity of TMAR which was split-off.
|
|
(3)
|
Represents the share exchange between TMAR and COARI.
|
|
(4)
|
Represents reversal of negative goodwill recorded as a result of the acquisition of Brasil Telecom in January 2009 for a purchase price which was less than the
book value of its assets.
|
VALUE OF COARI SHARES, AS OF THE BASE DATE, AFTER GIVING EFFECT TO THE PREVIOUS STEPS OF THE CORPORATE
RESTRUCTURING
|
|
|
|
|
|
|
344,056,834 shares
|
|
|
VALUE PER SHARE
|
|
|
Book equity value *
|
|
R$
|
30.211419
|
|
|
Adjustment per share
|
|
R$
|
15.074788
|
|
|
Equity value adjusted at market price (1)
|
|
R$
|
45.286207
|
|
|
(1)
|
Adjusted to reflect the exclusion of treasury stock
|
8. CONCLUSION
In the light of the analyses made of the previously mentioned documents, and on the basis of studies conducted by APSIS, the experts concluded that the rate of exchange of BRT shares for COARI shares,
appraised for the values of their Net Equity at Market Prices, appraised, in turn, through the assets approach, as of June 30 2011, are:
1.963406
shares of BRT for 1 share of COARI
Having concluded Report RJ-0375/11-06, which consists of 34 (thirty four) pages typed on one side and 4 (four) attachments and reproduced in 3 (three) original counterparts, APSIS Consultoria Empresarial
Ltda., CREA/RJ 82.2.00620-1 and CORECON/RJ RF/2.052-4, a company specializing in the appraisal of assets, legally represented by the signatories below, makes itself available for any clarifications which may be necessary.
Rio de Janeiro, August 12, 2011.
|
|
|
|
|
Diretor
|
|
Gerente de Projetos
|
9. ATTACHMENTS
|
|
1.
|
VALUATION CALCULATIONS
|
|
|
2.
|
MACHINERY AND EQUIPMENT VALUATION
|
|
|
4.
|
APSIS GLOSSARY AND PROFILES
|
|
|
|
|
|
|
|
|
|
SÃO PAULO - SP
Av. Angélica, nº 2.503, Conj. 42
Consolação, CEP: 01227-200
Tel.: +
55 11 3666.8448 Fax: + 55 11 3662-5722
|
|
RIO DE JANEIRO - RJ
Rua da Assembleia, nº. 35, 12º andar
Centro, CEP: 20011-001
Tel.: + 55 21 2212.6850
Fax: + 55 21 2212.6851
|
ATTACHMENT 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COARI PARTICIPAÇÕES S.A.
(COARI)
|
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND
REAIS)
|
|
|
BALANCE
AS OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
SUBSEQUENT
EVENT
(2)
|
|
|
SUBSEQUENT
EVENT
(3)
|
|
|
SUBSEQUENT
EVENT
(4)
|
|
|
PRO
FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT ASSETS (1)
|
|
|
|
938,789
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
938,789
|
|
|
|
0
|
|
|
|
938,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
|
|
|
|
|
195,229
|
|
|
|
740,221
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
935,450
|
|
|
|
0
|
|
|
|
935,450
|
|
|
Financial Applications
|
|
|
|
|
|
|
2,998
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,998
|
|
|
|
0
|
|
|
|
2,998
|
|
|
Receivable Accounts
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Inventories
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Deferred Taxes and Taxes Recoverable
|
|
|
|
|
|
|
341
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
341
|
|
|
|
0
|
|
|
|
341
|
|
|
Financial Instruments and Derivatives
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Judicial and Blocked Deposits
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Taxes
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Assets
|
|
|
|
|
|
|
740,221
|
|
|
|
-740,221
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
25,545,114
|
|
|
|
5,186,582
|
|
|
|
30,731,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM ASSETS
|
|
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
25,545,114
|
|
|
|
5,186,582
|
|
|
|
30,731,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Applications Measured at Fair Value
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Deferred Taxes
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Financial Instruments and Derivatives
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Judicial and Blocked Deposits
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Taxes
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Financial Assets Available for Sale
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Assets
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERMANENT
|
|
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
25,545,114
|
|
|
|
5,186,582
|
|
|
|
30,731,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
25,545,114
|
|
|
|
5,186,582
|
|
|
|
30,731,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Investments in subsidiaries:
|
|
|
|
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
25,545,114
|
|
|
|
5,186,582
|
|
|
|
30,731,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Brasil Telecom S.A.
|
|
|
49.2829
|
%
|
|
|
15,447,002
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
-10,370,089
|
|
|
|
5,076,913
|
|
|
|
1,627,312
|
|
|
|
6,704,225
|
|
|
- Telemar Norte Leste S.A.
|
|
|
100.0000
|
%
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
3,559,270
|
|
|
|
24,027,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Other Investments
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Work in Progress
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Automatic Switching Equipment
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Transmission and Other Equipment
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Infrastructure
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Buildings
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Other Assets
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Goodwill
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Data Processing System
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Brands and Patents
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Regulatory Licenses
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Other Intangible assets
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
16,385,791
|
|
|
|
0
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
26,483,903
|
|
|
|
5,186,582
|
|
|
|
31,670,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COARI PARTICIPAÇÕES S.A.(COARI)
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE
AS OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
SUBSEQUENT
EVENT
(2)
|
|
|
SUBSEQUENT
EVENT
(3)
|
|
|
SUBSEQUENT
EVENT
(4)
|
|
|
PRO
FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED
BALANCE
|
|
|
CURRENT LIABILITIES
|
|
|
761
|
|
|
|
0
|
|
|
|
1,074,598
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,075,359
|
|
|
|
0
|
|
|
|
1,075,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social and Worker Obligations
|
|
|
10
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
0
|
|
|
|
10
|
|
|
Suppliers
|
|
|
1
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
0
|
|
|
|
1
|
|
|
Fiscal Obligations
|
|
|
750
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
750
|
|
|
|
0
|
|
|
|
750
|
|
|
Loans and Financing
|
|
|
0
|
|
|
|
0
|
|
|
|
1,074,598
|
|
|
|
|
|
|
|
|
|
|
|
1,074,598
|
|
|
|
0
|
|
|
|
1,074,598
|
|
|
Dividends and Interest Payable on Capital
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Financial Instruments and Derivatives
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Taxes
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Refinancing Fiscal Program
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Permits and Leasing Payable
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Obligations
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Provisions
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
2,515
|
|
|
|
0
|
|
|
|
15,011,582
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,014,097
|
|
|
|
0
|
|
|
|
15,014,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
2,515
|
|
|
|
0
|
|
|
|
15,011,582
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,014,097
|
|
|
|
0
|
|
|
|
15,014,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and Financing
|
|
|
2,513
|
|
|
|
0
|
|
|
|
15,011,582
|
|
|
|
|
|
|
|
|
|
|
|
15,014,095
|
|
|
|
0
|
|
|
|
15,014,095
|
|
|
Related Party Liabilities
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Financial Instruments and Derivatives
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Permits and Leasing Payable
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Refinancing Fiscal Program
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Taxes
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Obligations
|
|
|
2
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
0
|
|
|
|
2
|
|
|
Provisions
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
16,382,515
|
|
|
|
0
|
|
|
|
-16,086,180
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
10,394,447
|
|
|
|
5,186,582
|
|
|
|
15,581,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
15,789,244
|
|
|
|
0
|
|
|
|
-14,358,753
|
|
|
|
0
|
|
|
|
|
|
|
|
1,430,491
|
|
|
|
0
|
|
|
|
1,430,491
|
|
|
Capital Reserves
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
20,468,201
|
|
|
|
|
|
|
|
20,468,201
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
Profit Reserves
|
|
|
1,727,427
|
|
|
|
0
|
|
|
|
-1,727,427
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Accumulated Profit or Loss
|
|
|
-177,283
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
-177,283
|
|
|
|
0
|
|
|
|
-177,283
|
|
|
Equity Valuation Adjustments
|
|
|
-956,873
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
-10,370,089
|
|
|
|
-11,326,962
|
|
|
|
0
|
|
|
|
-11,326,962
|
|
|
Market Adjustments
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
5,186,582
|
|
|
|
5,186,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
16,385,791
|
|
|
|
0
|
|
|
|
0
|
|
|
|
20,468,201
|
|
|
|
-10,370,089
|
|
|
|
26,483,903
|
|
|
|
5,186,582
|
|
|
|
31,670,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes amounts paid for the redemption of redeemable preferred shares of Brasil
Telecom to be issued in the Corporate Restructuring.
|
|
|
(2) Incorporation of the portion of the shareholders’ equity of TMAR which was
split-off.
|
|
|
(3) Represents the share exchange between TMAR and COARI.
|
|
|
(4) Represents reversal of negative goodwill recorded
as a result of the acquisition of Brasil Telecom in January 2009 for a purchase price which was less
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IR/CS as adjusted to the market:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASIL TELECOM S.A. (BRT)
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE AS OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED BALANCE
|
|
|
CURRENT ASSETS
|
|
|
7,162,456
|
|
|
|
-1,501,984
|
|
|
|
5,660,472
|
|
|
|
-105,381
|
|
|
|
5,555,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
|
1,803,213
|
|
|
|
-1,501,984
|
|
|
|
301,229
|
|
|
|
0
|
|
|
|
301,229
|
|
|
Financial Applications
|
|
|
791,218
|
|
|
|
0
|
|
|
|
791,218
|
|
|
|
0
|
|
|
|
791,218
|
|
|
Receivable Accounts
|
|
|
1,976,689
|
|
|
|
0
|
|
|
|
1,976,689
|
|
|
|
0
|
|
|
|
1,976,689
|
|
|
Inventories
|
|
|
18,727
|
|
|
|
0
|
|
|
|
18,727
|
|
|
|
0
|
|
|
|
18,727
|
|
|
Deferred Taxes and Taxes Recoverable
|
|
|
186,036
|
|
|
|
0
|
|
|
|
186,036
|
|
|
|
0
|
|
|
|
186,036
|
|
|
Instrumentos Financeiros e Derivativos
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Judicial and Blocked Deposits
|
|
|
1,470,051
|
|
|
|
0
|
|
|
|
1,470,051
|
|
|
|
0
|
|
|
|
1,470,051
|
|
|
Other Taxes
|
|
|
595,582
|
|
|
|
0
|
|
|
|
595,582
|
|
|
|
0
|
|
|
|
595,582
|
|
|
Other Assets
|
|
|
320,940
|
|
|
|
0
|
|
|
|
320,940
|
|
|
|
-105,381
|
|
|
|
215,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS
|
|
|
18,837,201
|
|
|
|
0
|
|
|
|
18,837,201
|
|
|
|
5,108,535
|
|
|
|
23,945,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM ASSETS
|
|
|
12,205,796
|
|
|
|
0
|
|
|
|
12,205,796
|
|
|
|
0
|
|
|
|
12,205,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Applications Measured at Fair Value
|
|
|
12,715
|
|
|
|
0
|
|
|
|
12,715
|
|
|
|
0
|
|
|
|
12,715
|
|
|
Deferred Taxes
|
|
|
5,215,755
|
|
|
|
0
|
|
|
|
5,215,755
|
|
|
|
0
|
|
|
|
5,215,755
|
|
|
Credits with Related Parties
|
|
|
2,055,844
|
|
|
|
0
|
|
|
|
2,055,844
|
|
|
|
0
|
|
|
|
2,055,844
|
|
|
Instrumentos Financeiros e Derivativos
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Judicial and Blocked Deposits
|
|
|
4,606,516
|
|
|
|
0
|
|
|
|
4,606,516
|
|
|
|
0
|
|
|
|
4,606,516
|
|
|
Other Taxes
|
|
|
171,625
|
|
|
|
0
|
|
|
|
171,625
|
|
|
|
0
|
|
|
|
171,625
|
|
|
Related Assets to Pension Funds
|
|
|
98,786
|
|
|
|
0
|
|
|
|
98,786
|
|
|
|
0
|
|
|
|
98,786
|
|
|
Other Assets
|
|
|
44,555
|
|
|
|
0
|
|
|
|
44,555
|
|
|
|
0
|
|
|
|
44,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERMANENT
|
|
|
6,631,405
|
|
|
|
0
|
|
|
|
6,631,405
|
|
|
|
5,108,535
|
|
|
|
11,739,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
8,265
|
|
|
|
0
|
|
|
|
8,265
|
|
|
|
0
|
|
|
|
8,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
5,435,464
|
|
|
|
0
|
|
|
|
5,435,464
|
|
|
|
5,108,535
|
|
|
|
10,543,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Work in Progress
|
|
|
752,668
|
|
|
|
0
|
|
|
|
752,668
|
|
|
|
0
|
|
|
|
752,668
|
|
|
- Automatic Switching Equipment
|
|
|
332,706
|
|
|
|
0
|
|
|
|
332,706
|
|
|
|
532,497
|
|
|
|
865,203
|
|
|
- Transmission and Other Equipment
|
|
|
2,606,674
|
|
|
|
0
|
|
|
|
2,606,674
|
|
|
|
1,786,151
|
|
|
|
4,392,825
|
|
|
- Infrastructure
|
|
|
996,149
|
|
|
|
0
|
|
|
|
996,149
|
|
|
|
1,620,654
|
|
|
|
2,616,803
|
|
|
- Buildings
|
|
|
416,005
|
|
|
|
0
|
|
|
|
416,005
|
|
|
|
1,019,219
|
|
|
|
1,435,224
|
|
|
- Other Assets
|
|
|
331,262
|
|
|
|
0
|
|
|
|
331,262
|
|
|
|
150,014
|
|
|
|
481,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets
|
|
|
1,187,676
|
|
|
|
0
|
|
|
|
1,187,676
|
|
|
|
0
|
|
|
|
1,187,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Goodwill
|
|
|
80,494
|
|
|
|
0
|
|
|
|
80,494
|
|
|
|
0
|
|
|
|
80,494
|
|
|
- Data Processing System
|
|
|
357,616
|
|
|
|
0
|
|
|
|
357,616
|
|
|
|
0
|
|
|
|
357,616
|
|
|
- Marcas e Patentes
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
- Regulatory Licenses
|
|
|
600,014
|
|
|
|
0
|
|
|
|
600,014
|
|
|
|
0
|
|
|
|
600,014
|
|
|
- Intangible Assets in Formation
|
|
|
146,705
|
|
|
|
0
|
|
|
|
146,705
|
|
|
|
0
|
|
|
|
146,705
|
|
|
- Other Intangible Assets
|
|
|
2,847
|
|
|
|
0
|
|
|
|
2,847
|
|
|
|
0
|
|
|
|
2,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
25,999,657
|
|
|
|
-1,501,984
|
|
|
|
24,497,673
|
|
|
|
5,003,154
|
|
|
|
29,500,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASIL TELECOM S.A. (BRT)
|
|
FINANCIAL STATEMENTS
|
|
|
BALANCE SHEET (THOUSAND REAIS)
|
|
BALANCE AS OF
06/30/2011
|
|
|
SUBSEQUENT
EVENT
(1)
|
|
|
PRO FORMA
BALANCE
|
|
|
MARKET
ADJUSTMENTS
|
|
|
ADJUSTED BALANCE
|
|
|
CURRENT LIABILITIES
|
|
|
7,427,880
|
|
|
|
-1,501,984
|
|
|
|
5,925,896
|
|
|
|
0
|
|
|
|
5,925,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social and Worker Obligations
|
|
|
119,433
|
|
|
|
0
|
|
|
|
119,433
|
|
|
|
0
|
|
|
|
119,433
|
|
|
Suppliers
|
|
|
1,473,807
|
|
|
|
0
|
|
|
|
1,473,807
|
|
|
|
0
|
|
|
|
1,473,807
|
|
|
Fiscal Obligations
|
|
|
96,854
|
|
|
|
0
|
|
|
|
96,854
|
|
|
|
0
|
|
|
|
96,854
|
|
|
Loans and Financing
|
|
|
1,039,312
|
|
|
|
0
|
|
|
|
1,039,312
|
|
|
|
0
|
|
|
|
1,039,312
|
|
|
Dividends and Interest Payable on Capital
|
|
|
56,528
|
|
|
|
0
|
|
|
|
56,528
|
|
|
|
0
|
|
|
|
56,528
|
|
|
Instrumentos Financeiros e Derivativos
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Taxes
|
|
|
1,159,832
|
|
|
|
0
|
|
|
|
1,159,832
|
|
|
|
0
|
|
|
|
1,159,832
|
|
|
Refinancing Fiscal Program
|
|
|
37,778
|
|
|
|
0
|
|
|
|
37,778
|
|
|
|
0
|
|
|
|
37,778
|
|
|
Permits and Leasing Payable
|
|
|
115,291
|
|
|
|
0
|
|
|
|
115,291
|
|
|
|
0
|
|
|
|
115,291
|
|
|
Other Obligations
|
|
|
2,015,023
|
|
|
|
-1,501,984
|
|
|
|
513,039
|
|
|
|
0
|
|
|
|
513,039
|
|
|
Provisions
|
|
|
1,314,022
|
|
|
|
0
|
|
|
|
1,314,022
|
|
|
|
0
|
|
|
|
1,314,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
8,269,903
|
|
|
|
0
|
|
|
|
8,269,903
|
|
|
|
1,701,072
|
|
|
|
9,970,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
8,269,903
|
|
|
|
0
|
|
|
|
8,269,903
|
|
|
|
1,701,072
|
|
|
|
9,970,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and Financing
|
|
|
2,684,864
|
|
|
|
0
|
|
|
|
2,684,864
|
|
|
|
0
|
|
|
|
2,684,864
|
|
|
Permits and Leasing Payable
|
|
|
517,938
|
|
|
|
0
|
|
|
|
517,938
|
|
|
|
0
|
|
|
|
517,938
|
|
|
Refinancing Fiscal Program
|
|
|
413,055
|
|
|
|
0
|
|
|
|
413,055
|
|
|
|
0
|
|
|
|
413,055
|
|
|
Other Taxes
|
|
|
555,934
|
|
|
|
0
|
|
|
|
555,934
|
|
|
|
1,701,072
|
|
|
|
2,257,006
|
|
|
Other Obligations
|
|
|
342,083
|
|
|
|
0
|
|
|
|
342,083
|
|
|
|
0
|
|
|
|
342,083
|
|
|
Provisions
|
|
|
3,756,029
|
|
|
|
0
|
|
|
|
3,756,029
|
|
|
|
0
|
|
|
|
3,756,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARTICIPATION OF NON-CONTROLLING SHAREHOLDERS
|
|
|
303
|
|
|
|
0
|
|
|
|
303
|
|
|
|
97
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
10,301,571
|
|
|
|
0
|
|
|
|
10,301,571
|
|
|
|
3,301,985
|
|
|
|
13,603,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
3,731,059
|
|
|
|
1,501,984
|
|
|
|
5,233,043
|
|
|
|
0
|
|
|
|
5,233,043
|
|
|
Capital Reserves
|
|
|
4,217,934
|
|
|
|
-1,501,984
|
|
|
|
2,715,950
|
|
|
|
0
|
|
|
|
2,715,950
|
|
|
Profit Reserves
|
|
|
1,885,511
|
|
|
|
0
|
|
|
|
1,885,511
|
|
|
|
0
|
|
|
|
1,885,511
|
|
|
Accumulated Profit or Loss
|
|
|
467,067
|
|
|
|
0
|
|
|
|
467,067
|
|
|
|
0
|
|
|
|
467,067
|
|
|
Ajustes de Avaliação Patrimonial
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Market Adjustments
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,301,985
|
|
|
|
3,301,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
25,999,657
|
|
|
|
-1,501,984
|
|
|
|
24,497,673
|
|
|
|
5,003,154
|
|
|
|
29,500,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents amounts paid for the redemption of redeemable preferred shares of Brasil Telecom to be issued in the Corporate Restructuring.
|
ATTACHMENT 2
MACHINERY AND EQUIPMENT VALUATION
The technical procedures used in this Report are in
accordance with the criteria set forth by Appraisal Standards NBR 14653-1:2001 and NBR 14653-2:2004 of ABNT – Brazilian Association of Technical Standards, and appraisal calculations for assessing values were devised on the basis of the direct
market data comparative method and the replacement cost method.
Based on prior experiences, APSIS developed a method for assessing values
based on comparative elements drawn out of appraised operational systems.
Below find the references used towards the performance of our work
and the criteria used for the main items of the appraisal:
REFERENCES
|
a)
|
Equity Control of fixed assets, supplied by BrT to all the group’s companies;
|
|
b)
|
Quotations for the relevant equipment in each functional class;
|
|
c)
|
Analysis of BrT’s new operational projects for the purpose of harmonizing concepts and premises (APSIS Engineering and BrT Engineering);
|
|
d)
|
Data supplied by managers of several central offices during technical visitations, and;
|
|
e)
|
Appraisal of specific features of each facility.
|
METHODOLOGY
For the assessment of machinery
and equipment, we used as supporting documentation, the appraisal report performed by APSIS in September 2009 (date of value), where at the time held the market assessment and determining the useful life of the entire database of assets companies
valued according to the character of relevance. The final values found in September 2009 have been depreciated to the date of June 30, 2011, and market adjustments were calculated from this results.
The method used consists of achieving the value of new, equal or similar machines and/or equipment through market research done with manufacturers,
suppliers and/or representatives, in addition to, as the case may be, assembly, installation and transportation expenses.
We adopted a
simplified model by virtue of the size of the data base analyzed (1,938 thousand items), which consisted in grouping assets per operating functional unit.
After connecting all items to functional units, we adopted the following appraisal criteria/premises:
For all equipment deemed obsolete, with no market value, MODERN EQUIVALENT value will be contemplated.
The functional classes devised by APSIS defined technology used per demand, and not per manufacturer or model, seeing that, with regards to the market,
technology is within the reach of all, and values are similar among manufacturers.
The relevant equipment was selected per functional class
to be quoted with manufacturers, or the equivalent, comprised in the very data bank supplied, with purchase date being 2008.
A correction
factor was used for each functional class per sampling, with reference to the relevant equipment quoted being used and adopting the premise that the value of all equipment belonging to the same functional class is affected in the same manner.
The economic useful life of fixed assets installed on the plant was defined as per field visitations and data collected from the
manufacturers themselves. We contemplated the following factors for assessing economic useful life: the need of replacement due to technological advances per demand, competition, market trends and the very useful life of the equipment.
Therefore, we arrived at the following probable estimates, per engineering group:
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- Commutation => 10 years
- Transmission => 10 years
- Infrastructure => 20 years, with towers being = 25 years
- Access Network => 10 years
- Termination => 10 years
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Some non-relevant functional classes were identified and therefore associated to other classes alike,
namely:
CRITERIA FOR REPLACEMENT VALUE ASSESSMENT– NON-RELEVANT CLASSES
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CLASSES
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CLASS AVERAGE
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CAB, C-B, C-O
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C-CG, C-M, C-P
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CEL-, CEL-A
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CEL-B
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D-DEL, D-E
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D-DO
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SAT-A, SAT-E
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D-DO, D-DEL, D-MO, D-MUL, D-RO
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E-B, E-T
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E-A, E-G, E-R
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F-I, S-A
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C-G, C-M, C-P, T-A, T-ANA, T-DEL, T-DO
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T-E, T-O
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T-A, T-ANA, T-DEL, T-DO
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TE-CP, TE-O, TE-VC, TE-WLL, TE-DA, TE-DEL
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TE-AS, TE-TP
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The current value of each equipment was achieved by contemplating replacement value depreciation on the basis of new
economic useful life from the date of purchase.
With regards to installations, the same were assessed as an integrating part of their
respective equipment.
ATTACHMENT 3
REAL ESTATE VALUATION
The technical procedures used in the report prepared by APSIS are in accordance with the criteria set forth by
Appraisal Standards NBR 14653-1:2001 and NBR 14653-2:2004 of ABNT - Brazilian Association
of Technical Standards
, and appraisal calculations to assess market values were prepared on the basis of the evolutive method (direct market data comparative method for land, and cost quantification method for buildings and improvements) and on
the basis of the direct market data comparative method.
Furthermore, the reports comply with the specifications and criteria set forth by
Appraisal Standards NBR 14653-1:2001, NBR 14653-2:2004 and NBR 14653-5:2004 of ABNT - Brazilian Association of Technical Standards and with the specifications and criteria set forth by USPAP (Uniform Standards of Professional Appraisal Practice), in
addition to requirements imposed by different bodies, such as: the Ministry of Treasury, Central Bank, Bank of Brazil, CVM (Brazilian equivalent of the Securities and Exchange Commission), SUSEP (Superintendence of Private Insurance), RIR/99 (Income
Tax Regulation/99), etc. The postulates comprised in the Professional Codes of Ethics set forth by CONFEA - Federal Council of Engineering, Architecture and Agronomy and by the Institute of Legal Engineering have also been complied with.
1. METHODOLOGY FOR REAL ESTATE APPRAISAL
The methodology used in the reports is described as follows.
1.1 ASSESSMENT OF THE REAL
ESTATE’S VALUE - EVOLUTIVE METHOD
This method defines the total value of the real estate on the basis of a combination between the direct
comparative method for assessing the value of land and the cost of reproduction method for assessing the value of improvements.
DIRECT
COMPARATIVE METHOD (Handling by Factors) - LAND
DEFINITION
This method defines land value by comparing market data from similar land. Firstly, market research is carried out aiming at producing a representative sampling of market data on land with features,
inasmuch as possible, similar to that under appraisal through the use of all available data. This stage, which involves research structures and strategies, starts with the profiling and outlining of the market under analysis upon the assistance of
existing theories and concepts or hypotheses originated from experiences acquired by the appraiser on value formation. Within research structure, variables are chosen which, in principle, are relevant for explaining value formation, and presumed
relations between them and dependent variables have been established. Researched items are then submitted to technical unification through the assistance of approved empirical weighting factors, which aim at weighting the features and qualities of
the data researched.
IDENTIFICATION OF THE SAMPLE’S VARIABLES
Dependent variables
In order to correctly specify dependent variables, market investigation in
connection to their behavior and to ways in which prices are expressed (for instance, total or unit price, reference currency, payment forms) is required, as well as observation of measurement unit unification.
Independent variables
Independent variables
refer to physical features (for instance, area, façade), location features (such as district, street, avenue, distance to pole of influence, among others), and economic features (such as bid or transaction, business period and condition - in
cash or in installments). They must be chosen on the basis of existing theories, knowledge acquired, common sense and other features which have revealed themselves important during performance of our work, as some variables contemplated during
research planning may have revealed themselves to be of little relevance or vice-versa. Whenever possible, adoption of quantitative variables is recommended.
UNIFICATION FACTORS NORMALLY USED IN THE REPORTS
According to Appraisal Standard NBR 14653-2:2004
of ABNT, for foundation level I to be attained, the adjustment interval acceptable for each factor or set of factors is 0,50 to 1,50. The following factors were used in this appraisal:
F1 - Bid Factor
This factor has been adopted for items under bid, bearing in mind that it normally suffers a value reduction for the purpose of closing the deal. It varies from 0,8 to 1,0.
F2 - Transposition Factor
It has been adopted
for the purpose of unifying researched items with the real estate under appraisal, in function of the relative location thereof.
F3 - Area
Factor
It has been adopted for the purpose of unifying researched items with the real estate under appraisal, in function of the relative
area thereof.
ü
F3 = (s/S)
1/4
Where: s = area of researched item
S= area of real estate under appraisal
When variation between two areas is less
than 30%; or
ü
F3 = (s/S)
1/8
When variation between two areas is over 30%.
F4 - Topography Factor
It has been adopted to
unify researched items with the real estate under appraisal in function of the relative topography thereof.
F5 - Frontage Factor
It has been adopted to unify researched items with the real estate under appraisal, in function of the relative frontage thereof.
ü
F5 =
(TA/Ta)
1/4
Where: TA = frontage of the real estate under appraisal
Ta = frontage of the researched item
With expression being limited to the interval of 0,5 <= TA/Ta >= 2,0
After unification,
these values are subject to a statistical treatment for assessment of the unit value to be adopted for the real estate under appraisal.
After
researched items have been duly unified, Student’s Percentile-T Method is adopted for assessing the arbitration field with 80% confidence. Within this interval, the appraiser, at his discretion, adopts the unit value deemed appropriate. This
value is multiplied by the constructed area of the real estate under appraisal, with the value thereof thus being arrived at.
COST
QUANTIFICATION METHOD - BUILDINGS AND IMPROVEMENTS
The cost quantification method determines value on the basis of the cost of reproduction
minus depreciation of buildings and improvements, with all original features or re-allocation thereof being observed, and depreciation due to physical deterioration, functionality and economic/external obsolescence being contemplated.
The unit value (new value) for buildings and construction is defined through the adoption of the basic unit
cost of construction, which is determined by inquiries made to specialized magazines on civil construction indexes and costs (PINI EDITORS). This value is multiplied by the equivalent construction area thereof.
A percentage relative to factors not included in the cost of construction, such as: BDI (Indirect Costs and Profits) rate, project cost, fees, etc., is
added to this sum, with the building’s cost of production minus depreciation being thus established.
Depreciation results from the
items’ wear and tear. Functional obsolescence occurs in function of a decrease in value based on the internal condition of the real estate, produced by inadequate design, materials, or processes, which give rise to inadequacies, capability,
cancellation or exceeding operational costs.
Economic/external obsolescence is an irreparable injury to the value of buildings and
improvements, caused by unfavorable conditions of the local economy and industrial sector, such as: unavailability of funding, loss of sources of raw material and manpower, lack of efficient transportation, change of trade center, change in
legislation and change in customs.
A depreciation factor set forth by the
Ross-Heidecke Method
(in function of the state of
conservation and apparent age of the building) is applied to the prior achieved cost of reproduction of the building, with the building’s cost of reproduction minus depreciation being thus arrived at.
CALCULATION OF THE REAL ESTATE’S FINAL VALUE
The market value for the purchase and sale of the real estate will be achieved through the sum of land, construction and improvement quotas. If the resulting value is not appropriate to the status of the
real estate market of the region within the segment under analysis, a trade factor has been adopted.
1.2 DIRECT COMPARATIVE METHOD (Handling
by Factors)
DEFINITION
This method
defines land value by comparing market data from similar land. Firstly, market research is carried out aiming at producing a representative sampling of market data on real estate with features, inasmuch as possible, similar to that under appraisal
through the use of all available evidence. This stage, which involves research structures and strategies, starts with the profiling and outlining of the market under analysis upon the assistance of existing theories and concepts or hypotheses
originated from experiences acquired by the appraiser on value formation. Within research structure, variables are chosen which, in principle, are relevant for explaining value formation, and presumed relations between them and dependent variables
have been established. Researched items are then submitted to technical unification through the assistance of approved empirical weighting factors, which aim at weighting the features and qualities of the data researched.
IDENTIFICATION OF THE SAMPLE’S VARIABLES
Dependent variables
In order to correctly specify dependent variables, market investigation in
connection to their behavior and to ways in which prices are expressed (for instance, total or unit price, reference currency, payment forms) is required, as well as observation of measurement unit unification.
Independent variables
Independent variables
refer to physical features (for instance, area, façade), location features (such as district, street, avenue, distance to pole of influence, among others), and economic features (such as bid or transaction, business period and condition - in
cash or in installments). They must be chosen on the basis of existing theories, knowledge acquired, common sense and other features which have revealed themselves important during performance of our work, as some variables contemplated during
research planning may have revealed themselves to be of little relevance or vice-versa. Whenever possible, adoption of quantitative variables is recommended.
UNIFICATION FACTORS NORMALLY USED IN THE REPORTS
According to Appraisal Standard NBR 14653-2:2004 of ABNT, for foundation level I to be attained, the adjustment interval acceptable for each factor or set of factors is 0,50 to 1,50. The following factors
were used in this appraisal:
F1 - Bid Factor
This factor has been adopted for items under bid, bearing in mind that it normally suffers a value reduction for the purpose of closing the deal. It varies from 0,8 to 1,0.
F2 - Transposition Factor
It has been adopted
for the purpose of unifying researched items with the real estate under appraisal, in function of the relative location thereof.
F3 - Area
Factor
It has been adopted for the purpose of unifying researched items with the real estate under appraisal, in function of the relative
area thereof.
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F3 = (s/S)
1/4
when
variation between two areas is less than 30%; or
F3 =
(s/S)
1/8
when variation between two areas is over 30%; Where:
s
= area of researched item
S
= area of real estate under appraisal
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F4 - Age Factor
It has been adopted to unify researched items with the real estate under appraisal, in function of the relative age thereof.
F5 - Construction Pattern Factor
It has been adopted to unify researched items with the real
estate under appraisal, in function of the construction pattern thereof.
After being unified, these values are subject to a statistical
treatment for assessment of the unit value to be adopted for the real estate under appraisal.
After researched items have been duly unified,
Student’s Percentile-T Method is adopted for assessing the arbitration field with 80% confidence. Within this interval, the appraiser, at his discretion, adopts the unit value deemed appropriate. This value is multiplied by the constructed area
of the real estate under appraisal, with the value thereof thus being arrived at.
ATTACHMENT 4
ABL - Gross Leasable Area
ABNT - Brazilian Technical Standards Association
Allocated Codes - serial number (grades or
weights) to differentiate the quality features of properties.
Allotment - subdivision of a tract of land into lots for buildings with the
opening of new thoroughfares, or the extension, modification or expansion of existing ones.
Amortization - systematic allocation of the
depreciable value of an asset over its useful life.
Apparent Age - estimated age of a property according to its characteristics and
conservation status at the time of inspection.
Asset - a resource controlled by the entity as a result of past events from which future
economic benefits are expected for the entity.
Asset Approach - valuation of companies where all assets (including those not accounted for)
have their values adjusted to the market. Also known as market net equity.
Base Date - specific date (day, month and year) of application of
the assessment value.
Basic Infrastructure - urban rainwater drainage equipment, street lighting, sewage system, drinking water, public and
home electricity supply and access routes.
BDI - a percentage that indicates the benefits and overhead costs applied to the direct cost of
construction.
Best Use of the Property - the most economically appropriate use of a certain property according to its characteristics and
surroundings, respecting legal limitations.
Beta - a systematic risk measure of a share; price trend of a particular share to be correlated with
changes in a given index.
Book Value - the value at which an asset or liability is recognized on the balance sheet.
Building Standard - the quality of the improvements according to the specifications of design, materials, workmanship and performance effectively used in
construction.
Business Combination - union of separate entities or businesses producing financial statements of a single reporting entity.
Transaction or other event by which an acquirer obtains control of one or more businesses, regardless of the legal form of operation.
Business Risk - uncertainty of realization of expected future returns of the business resulting from factors other than financial leverage.
CAPEX (Capital Expenditure) - fixed asset investments.
Capitalization - conversion of a simple period of economic benefits into value.
CAPM (Capital
Asset Pricing Model) - model in which the capital cost for any share or lot of shares equals the risk free rate plus risk premium provided by the systematic risk of the share or lot of shares under investigation. Generally used to calculate the Cost
of Equity or the Cost of Shareholder Capital.
Capitalization Rate - any divisor used to convert economic benefits into value in a single
period.
Capital Structure - composition of a company’s invested capital, between own capital (equity) and third-party capital (debt).
Cash Flow - cash generated by an asset, group of assets or business during a given period of time. Usually the term is supplemented by a
qualification referring to the context (operating, non-operating, etc...).
Cash Flow on Invested Capital - cash flow generated by the company to be reverted to lenders (interest and
amortizations) and shareholders (dividends) after consideration of cost and operating expenses and capital investments.
Cash-Generating Unit
- smallest identifiable group of assets generating cash inflows that are largely independent on inputs generated by other assets or groups of assets.
Casualty - an event that causes financial loss.
Company - commercial or industrial entity,
service provider or investment entity holding economic activities.
Conservation Status - physical status of an asset in result of its
maintenance.
Control - power to direct the strategic policy and administrative management of a company.
Control Premium - value or percentage of the pro-rata value of a lot of controlling shares over the pro-rata value of non-controlling shares, which
reflect the control power.
Cost - the total direct and indirect costs necessary for production, maintenance or acquisition of an asset at a
particular time and situation.
Cost of Capital - Expected rate of return required by the market as an attraction to certain investment funds.
CPC - Accounting Pronouncements Committee.
Current Value - value replacement with a new value depreciated as a result of the physical state the property is in.
CVM - Securities and Exchange Commission.
Damage - damage caused to others by the occurrence of flaws, defects, accidents and crimes, among others.
Data Treatment - application of operations to express, in relative terms, the attribute differences between the market data and data of the property being assessed.
Date of Issue - closing date of the valuation report, when conclusions are conveyed to the client.
DCF (Discounted Cash Flow) - discounted cash flow.
D & A - depreciation and amortization.
Dependent Variable - variable to be explained by the
independent ones.
Depreciable Value - cost of the asset, or other amount that substitutes such cost (financial statements), less its residual
value
Depreciation - systematic allocation of the depreciable value of an asset during its useful life.
Dichotomous Variable - variable that assumes only two values.
Direct Production Cost - spending on inputs, including labor, in the production of goods.
Discount for Lack of Control - value or percentage deducted from the pro-rata value of 100% of the value of a company that reflects the absence of part
or all of the control.
Discount for Lack of Liquidity - value or percentage deducted from the pro-rata value of 100% of the value
of a company that reflects the lack of liquidity.
Discount Rate - any divisor used to convert a flow of future economic benefits into present
value.
Drivers - value drivers or key variables.
EBIT (Earnings before Interest and Taxes) - earnings before interest and taxes.
EBITDA (Earnings
before Interest, Taxes, Depreciation and Amortization) - earnings before interest, taxes, depreciation and amortization.
Economic Benefits -
benefits such as revenue, net profit, net cash flow, etc.
Efficient Use - that which is recommendable and technically possible for the
location on a reference date, among the various uses permitted by the applicable law, observing surrounding marketing trends.
Electrical
Damage Value - estimated cost of the repair or replacement of parts, when the property suffers electrical damage. Values are tabulated in percentages of the Replacement Value and have been calculated through the study of equipment manuals and the
expertise in corrective maintenance of Apsis technicians.
Enterprise - set of properties capable of producing revenue through marketing or
economic exploitation. It can be: real estate (e.g. subdivision, commercial / residential buildings), real-estate based (e.g., hotel, shopping mall, theme parks), industrial or rural.
Enterprise Value - economic value of the company.
Equity Value - economic value of the equity.
Equivalent Construction Area - constructed area on which the unit cost equivalence of corresponding construction is applied, according to
ABNT postulates.
Equivalent Depth - numerical result of the division of a lot area by its main projected front.
Expertise - technical activity performed by a professional with specific expertise to investigate and clarify facts, check the status of property,
investigate the causes that motivated a particular event, appraise assets, their costs, results or rights.
Facilities - set of materials,
systems, networks, equipment and operational support services for a single machine, production line or plant, according to the degree of aggregation.
Fair Market Value - value at which an asset could have its ownership exchanged between a potential seller and a potential buyer, when both parties have reasonable knowledge of relevant facts and neither
is under pressure to do so.
Fair Value Less Cost to Sell - value that can be obtained from the sale of an asset or cash-generating unit less
sale expenses, in a transaction between knowledgeable, willing and uninterested parties.
FCFF (Free Cash Flow to Firm) - Free cash flow to
firm, or unlevered free cash flow.
Financial Lease - that which substantially transfers all the risks and benefits related to the ownership
of the asset, which may or may not eventually be transferred. Leases that are not financial leases are classified as operating leases.
Fixed
Asset - tangible asset available for use in the production or supply of goods or services, in third-party leasing, investments, or for management purposes, expected to be used for more than one accounting period.
Flaw - anomaly that affects the performance of products and services, or makes them inadequate to the purposes intended, causing inconvenience or
material loss to the consumer.
Forced Liquidation - condition on the possibility of a compulsory sale or in a shorter period than the
average absorption by the market.
Free Float - percentage of outstanding shares on the company’s total capital.
Frontage - horizontal projection of the line dividing the property and the access road; measurement of the front of a building.
Goodwill - see Goodwill based on the expectation of future profitability (goodwill).
Homogenization - treatment of observed prices by application of mathematical transformations that express, in relative terms, the differences between market data attributes and those of the property
assessed.
Homogenized Area - useful or private area, or built with mathematical treatments for valuation purposes, according to criteria
based on the real estate market.
IAS (International Accounting Standards) - International Accounting Standards.
IASB (International Accounting Standards Board) - International Accounting Standards Board.
Ideal Fraction - percentage owned by each of the buyers (tenants) of the land and of the building’s common items.
IFRS (International Financial Reporting Standards) - International Financial Reporting Standards, a set of international accounting pronouncements published and reviewed by the IASB.
Impairment - see Losses on devaluation
Impairment Losses (impairment) - book value of the asset that exceeds, in the case of
stocks, its selling price less the cost to complete it and expense of selling it; or, in the case of other assets, their fair value less expenditure for sale.
Income Approach - valuation method for converting the present value of expected economic benefits.
Independent Variables - variables that provide a logical content to the formation of the value of the property subject to the assessment.
Indirect Production Cost - administrative and financial costs, benefits and other liens and charges necessary for the production of goods.
Influence Point - atypical point that, when removed from the sample, significantly changes the estimated parameters or the linear structure of the model.
Insurance - risk transfer guaranteed by contract whereby one party undertakes, subject to payment of premium, to indemnify another for the
occurrence of casualties covered under the policy.
Insurance Value - value at which an insurance company assumes the risks, and does not
apply to the land and foundations, except in special cases.
Intangible Asset - identifiable non-monetary asset without physical substance.
This asset is identifiable when: it is separable, i.e., capable of being separated or divided from the entity and sold, transferred, licensed, leased or exchanged, either alone or together with the related contract, asset or liability; or originates
from contractual rights or other legal rights regardless of their being transferred, separable from the entity or from other rights and obligations.
Internal Rate of Return - discount rate where the present value of future cash flow is equivalent to the cost of investment.
International Accounting Standards - standards and interpretations adopted by the IASB. They include:
International Financial Reporting Standards (IFRS) International Accounting Standards (IAS) and interpretations developed by the Interpretation Committee on International Financial Reporting Standards (IFRIC) or by the former Standing
Interpretations Committee (SIC).
Invested Capital - the sum of own capital and third-party capital invested in a company. Third-party capital
is usually related to debt with interest (short and long-term) and must be specified within the context of the valuation.
Investment Property
- property (land, building or building part, or both) held by the owner or lessee under the lease, both to receive payment of rent and for capital appreciation or both, other than for: use in the production or supply of goods or services, as well as
for administrative purposes.
Investment Value - value for a particular investor based on individual interests in the property in question. In
the case of business valuation, this value can be analyzed by different situations, such as the synergy with other companies of an investor, risk perceptions, future performance and tax planning.
Key Money - amount paid by the prospective tenant for signature or transfer of the lease contract, as compensation for the point of sale.
Key Variables - variables that, a priori, and traditionally have been important for the formation of property value.
Levered Beta - beta value reflecting the debt in capital structure.
Liability - present obligation that arises from past events, whereby it is hoped that the settlement thereof will result in the inflow of funds from the entity embodying economic benefits.
Liquidation Value - value of a property offered for sale on the market outside the normal process, i.e. one that would be established if the property
were offered for sale separately, taking into account the costs involved and the discount required for a sale in a reduced period.
Liquidity
- ability to rapidly convert certain assets into cash or into the payment of a certain debt.
Market Approach - valuation method in which
multiple comparisons derived from the sales price of similar assets are adopted.
Market Data - set of information collected on the market
related to a particular property.
Marketing Factor - the ratio between the market value of an asset and its reproduction cost less
depreciation or replacement cost, which may be higher or lower than 1 (one).
Market Research - set of activities for identification, investigation, collection, selection, processing,
analysis and interpretation of results on market data.
Maximum Insurance Value - maximum value of the property for which it is recommendable
to insure it. This criterion establishes that the property whose depreciation is greater than 50% should have its Maximum Insurance Value equivalent to twice as much as the Current Value; and the property whose depreciation is with less than 50%
should have its Maximum Insurance Value equivalent to the Replacement Value.
Multiple - market value of a company, share or invested capital,
divided by a valuation measurement of the company (EBITDA, income, customer volume, etc...).
Net Debt - cash and cash equivalents, net
position in derivatives, short-term and long-term financial debts, dividends receivable and payable, receivables and payables related to debentures, short-term and long-term deficits with pension funds, provisions, and other credits and obligations
to related parties, including subscription bonus.
Non-Operating Assets - those not directly related to the company’s operations (may or may not generate
revenue) and that can be disposed of without detriment to its business.
Null hypothesis in a regression model - hypothesis in which one or a
set of independent variables involved in the regression model are not important to explain the variation of the phenomenon in relation to a pre-established significance level.
Operating Assets - assets that are basic to the company’s operations.
Operating Lease -
that which does not substantially transfer all the risks and benefits incidental to the ownership of the asset. Leases that are not operating leases are classified as financial leases.
Parent Company - an entity that has one or more subsidiaries.
Perpetual Value - value at the end
of the projective period to be added on the cash flow.
Point of Sale - intangible asset that adds value to commercial property, due to its
location and expected commercial exploitation.
Population - total market data of the segment to be analyzed.
Premium for Expected Future Profitability (goodwill) - future economic benefits arising from assets not capable of being individually identified or
separately recognized.
Present Value - the estimated present value of discounted net cash flows in the normal course of business.
Price - the amount by which a transaction is performed involving a property, a product or the right thereto.
Private Area - useful area plus building blocks (such as walls, pillars, etc.) and elevator hallway (in
specific cases).
Property - something of value, subject to use, or that may be the object of a right, which integrates an equity.
Qualitative Variables - variables that cannot be measured or counted, only ordered or ranked, according to attributes inherent to the property (e.g.,
building standard, conservation status and quality of the soil).
Quantitative Variables - variables that can be measured or counted (e.g.,
private area, number of bedrooms and parking spaces).
Range for Real Estate Valuations - range in the vicinity of the point estimator adopted
in the valuation within which to arbitrate the value of the property provided it is justified by the existence of features that are not contemplated in the model.
Re (Cost of Equity) - return required by shareholders for the capital invested.
Real Estate -
property, consisting of land and any improvements incorporated thereto. Can be classified as urban or rural, depending on its location, use or to its highest and best use.
Recoverable Value - the highest fair value of an asset (or cash-generating unit) minus the cost of sales compared with its value in use.
Rd (Cost of Debt) - a measure of the amount paid for the capital earned from third parties, in the form of loans, financing, market funding, among others.
Reference Real Estate - market data with features comparable to the property assessed.
Regression Model - the model used to represent a specific phenomenon, based on a sample, considering the
various influencing characteristics.
Remaining Life - Property’s remaining life.
Replacement Cost - a property’s reproduction cost less depreciation with the same function and features comparable to the property assessed.
Replacement Value for New - value based on what the property would cost (usually in relation to current market prices) to be replaced with or
substituted by a new, equal or similar property.
Reproduction Cost - expense required for the exact duplication of a property, regardless of
any depreciation.
Reproduction Cost Less Depreciation - a property’s reproduction cost less depreciation, considering the state it is
in.
Residual Value - value of new or used asset projected for a date limited to that in which it becomes scrap, considering its being in
operation during the period.
Residual Value of an Asset - estimated value that the entity would obtain at present with the sale of the asset,
after deducting the estimated costs thereof, if the asset were already at the expected age and condition at the end of its useful life.
Sample - set of market data representative of a population.
Scrap Value - market value of a property’s reusable materials in disabling conditions, without their being used for production purposes.
Shareholders’ Equity at Market Prices - see Assets Approach.
Statistical Inference - part
of statistical science that allows drawing conclusions about the population from a sample.
Subsidiary - entity, including that with no legal
character, such as an association, controlled by another entity (known as the parent company).
Supporting Documentation - documentation
raised and provided by the client on which the report premises are based.
Survey - evidence of local events through insightful observations
in a property and of the factors and conditions that constitute or influence it.
Tangible Asset - physically existing asset, such as land,
building, machinery, equipment, furniture and tools.
Technical Report - detailed report or technical clarification issued by a legally
qualified
and trained professional on a specific subject.
Total Construction Area - resulting
from the sum of the real private area and the common area allocated to an independent unit, defined according to ABNT.
Urbanizable Land -
land eligible to receive urban infrastructure works aiming at its efficient use, by means of the subdivision, split or implementation of a business.
Useful Area - real private area subtracted from the area occupied by walls and other building blocks that prevent or hinder its use.
Useful Economic Life - the period in which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset by the entity.
Valuation - act or process of determining the value of an asset.
Valuation Methodology - one or more approaches used in developing evaluative calculations for the indication of the value of an asset.
Value at Risk - representative value of the share of the property one wishes to insure and that may correspond to the maximum insurable value.
Value in Use - value of a property in operating conditions in its present state, such as the useful part of an industry, including, where
relevant, the costs of design, packaging, taxes, freight and installation.
Value Plan - the graphic representation or listing of generic
square meter values of land or of the real estate on the same date.
WACC (Weighted Average Cost of Capital) - model in which capital cost is
determined by the weighted average of the market value of capital structure components (own and others).
Exhibit 5.1
Registration Statement on Form F-4 of
Brasil Telecom S.A.
Rio de Janeiro, August [ ], 2011
Brasil Telecom S.A.
Rua General Polidoro, 99, 5º andar (part)
Botafogo Cep: 22280-001
Rio de Janeiro- RJ,
Brasil
Ladies and Gentlemen:
We
have acted as Brazilian counsel to Brasil Telecom S.A., a public company organized under the laws of the Federative Republic of Brazil (“
Brasil Telecom
”) in connection with the merger under Brazilian law of Tele Norte Leste
Participações S.A. (“
TNL
”) with and into Brasil Telecom (the “
Merger
”), and the related preparation and filing by Brasil Telecom with the Securities and Exchange Commission (the
“
Commission
”), under the Securities Act of 1933, as amended (the “
Securities Act
”), of a Registration Statement on Form F-4 (as amended to the date hereof, the “
Registration Statement
”).
We have examined and relied upon originals or certified, conformed or reproduction copies of agreements, instruments, documents and records of Brasil
Telecom, as we have deemed necessary or appropriate for the purposes of the opinions expressed below.
In all such examinations, we have
assumed, without any independent investigation or inquiry of any kind, the legal capacity of all natural persons executing such documents, the genuineness of all signatures on original or certified copies, the authenticity and completeness of all
original or certified copies and the conformity to original or certified documents of all copies submitted to us as conformed or reproduction copies.
We have assumed that there are no other documents, agreements or other arrangements involving any party or other relevant instrument that may in any way affect the opinions expressed herein.
We have relied as to factual matters upon, and have assumed the accuracy of, representations, statements and
certificates of or from public officials and of or from officers and representatives of Brasil Telecom.
Based upon the foregoing, and subject
to each and all of the limitations, qualifications and assumptions set forth herein, we are of the opinion that Brasil Telecom shares which will be issued and outstanding upon the completion of the Merger, as described in the Registration Statement
(the “
Shares
”) will be duly authorized and validly issued, fully paid in and non-assessable and free of statutory preemptive rights.
The foregoing opinion is subject to the following assumptions, qualifications, limitations and exceptions: (i) the Shares are issued as described in the Registration Statement; (ii) the Merger
is duly approved by the shareholders of Brasil Telecom and TNL entitled to vote in the respective extraordinary shareholders’ meetings of Brasil Telecom and TNL duly summoned and carried out for such purpose and such shareholders’ meetings
occur in compliance with all applicable Brazilian laws as in effect on the relevant date; (iii) the minutes of the extraordinary shareholders’ meetings of Brasil Telecom and TNL are duly published and registered with the Commercial
Register as required under Brazilian law; and (iv) the Merger is ratified within the 10-day period after the end of the withdrawal rights period referenced in the Registration Statement.
We are qualified to practice law in Brazil only and therefore the opinions expressed in this letter are limited to questions arising under the laws of Brazil. This opinion does not cover any questions
arising under or relating to any laws other than the laws of Brazil as in effect at the date of this opinion and we have assumed that there is nothing in any other law that affects our opinion.
We expressly disclaim any responsibility to advise you or the holders of any securities issued by you or the holders of any other security that underlies
any securities issued by you, with respect to any developments, modifications or circumstances of any kind occurring after the date hereof, even though such development or modification may affect the legal analysis, legal conclusion or any other
matter set forth in or relating to this opinion letter.
We express no opinion as to any agreement, instruments or other documents other than
as specified in this letter.
This opinion is limited to the matters referred to herein and shall not be construed as extending to any other matter
or document not referred to herein.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the
reference made to our firm under the captions “Part Seven—Additional Information For Shareholders—Enforceability of Civil Liabilities Under U.S. Securities Laws” and “Part Eight—Legal And Regulatory Matters—Legal
Matters” in the Registration Statement. In giving such consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations promulgated
thereunder.
Very truly yours,
Exhibit 8.1
Registration Statement on Form F-4 of
Brasil Telecom S.A.
Rio de Janeiro, August [ ], 2011
Brasil Telecom S.A.
Rua General Polidoro, 99, 5º andar (part)
Botafogo Cep: 22280-001
Rio de Janeiro- RJ,
Brasil
Ladies and Gentlemen:
We
have acted as Brazilian counsel to Brasil Telecom S.A., a public company organized under the laws of the Federative Republic of Brazil (“
Brasil Telecom
”), in connection with the proposed merger of Tele Norte Leste
Participações S.A. (“
TNL
”) with and into Brasil Telecom, and the related preparation and filing by Brasil Telecom with the Securities and Exchange Commission (the “
Commission
”), under the Securities
Act of 1933, as amended (the “
Securities Act
”), of a Registration Statement on Form F-4 (as amended to the date hereof, the “
Registration Statement
”).
We hereby confirm that the discussion set forth in the Registration Statement and the prospectus contained therein under the caption “Part Five—The Merger—Material Tax
Considerations—Brazilian Tax Considerations,” insofar as such discussion constitute summaries of Brazilian law, fairly summarize the matters referred to therein based on what is expressed in Brazilian law in force as of the date of this
letter.
We hereby consent to the filing of this opinion with Commission as an exhibit to the Registration Statement. In giving such consent,
we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations promulgated thereunder.
Very truly yours,
Exhibit 8.2
, 2011
Brasil Telecom S.A.
Rua General
Polidoro, No. 99, 5th floor/part – Botafogo
22280-004 Rio de Janeiro, RJ, Brazil
Re: Registration Statement on Form F-4 No. 333-[ ]
Ladies and Gentlemen:
We have
acted as special United States federal income tax counsel to Brasil Telecom S.A., a corporation (
sociedade anônima
) organized under the laws of the Federative Republic of Brazil (“
Brasil Telecom
”), in connection with
the preparation and filing with the Securities and Exchange Commission (the “
Commission
”) of a Registration Statement on Form F-4, Registration No. 333-[ ]
(the “
Registration Statement
”) under the Securities Act of 1933, as amended (the “
Securities Act
”), relating to the registration of common shares (“
Common Shares
”, including Common Shares in the
form of American Depositary Shares (“
ADS
”)) and preferred shares (“
Preferred Shares
”, including Preferred Shares in the form of ADS) of Brasil Telecom (such Common Shares and Preferred Shares referred to herein as
the “
Shares
”). The Shares will be issued by Brasil Telecom pursuant to a merger with Tele Norte Leste Participações S.A. (“TNL”), a corporation (
sociedade anônima
) organized under the laws of the
Federative Republic of Brazil, in which holders of common shares, preferred shares and ADSs of TNL receive Common Shares, Preferred Shares or ADSs of Brasil Telecom (the “
Merger
”), as set forth in the prospectus contained in the
Registration Statement (the “
Prospectus
”).
We hereby confirm that based on certain representations obtained
from officers and other representatives of Brasil Telecom, the discussion contained under the captions “Part Five—The Merger—Material Tax Considerations— U.S. Federal Income Tax Considerations” in the Registration Statement,
subject to the assumptions, qualifications and limitations contained therein, set forth our opinion as to the material U.S. federal income tax considerations generally applicable to the Merger and the ownership and disposition of the Shares by
“U.S. Holders” (as such term is defined in such discussion in the Registration Statement).
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We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the
reference made to our Firm under the heading “Legal Matters” in the Registration Statement. In giving such consent, however, we do not thereby admit that we are within the category of persons whose consent is required under Section 7
of the Securities Act or the rules and regulations promulgated thereunder.
Very truly yours,
Exhibit 10.5
AGREEMENT PBOA/SPB No. 109/2011 – ANATEL
AGREEMENT FOR
CONCESSION OF SWITCHED FIXED TELEPHONY SERVICE - LOCAL MODE - ENTERED INTO BETWEEN AGÊNCIA NACIONAL DE TELECOMUNICAÇÕES AND BRASIL TELECOM S.A.
By this agreement, the first party
Agência Nacional de Telecomunicações
, hereinafter referred to as Anatel, an entity that is an integral part of the Brazilian Federal
Government, and pursuant to Federal Law No. 9,472 of July 16, 1997, the General Telecommunications Law (LGT), responsible for exercising the Granting Power, hereby represented by its President
RONALDO MOTA SARDENBERG
, a Brazilian
citizen, married, diplomat, holder of Identity Card (CI) No. 5601 MRE and enrolled with the Individual Taxpayer’s Registry (CPF/MF) under No. 075.074.884-20, together with Board Member
JOÃO BATISTA DE REZENDE
, a
Brazilian citizen, divorced, economist, holder of Identity Card (CI) No. 3.412.238-5 SSP-PR and enrolled with the Individual Taxpayer’s Registry (CPF/MF) under No. 472.648.709-44, and, the second party
BRASIL TELECOM S.A.
,
enrolled with the Ministry of Finance’s Corporate Taxpayers’ Registry (CNPJ/MF) under No. 76.535.764/0322-66 (sector 18); 76.535.764/0321-85 (sector 19); 76.535.764/0324-28 (sector 21); 76.535.764/0329-32 (sector 23);
76.535.764/0328-51 (sector 24); 76.535.764/0326-90 (sector 26); 76.535.764/0323-47 (sector 27); 76.535.764/0327-70 (sector 28) and 76.535.764/0002-24 (sector 29), by its Executive Planning Officer
JOÃO DE DEUS PINHEIRO DE MACEDO
, a
Brazilian citizen, married, engineer, holder of Identity Card (CI) No. 560064 20 SSP-BA and enrolled with the Individual Taxpayer’s Registry (CPF/MF) under No. 060.055.275-68 and by its Regulatory Officer
PAULO TODESCAN LESSA
MATTOS
, a Brazilian citizen, married, lawyer, holder of Identity Card (CI) No. 163.075 OAB-SP and enrolled with the Individual Taxpayers’ Registry (CPF/MF) under No. 188.745.248-62, hereinafter referred to as the Concessionaire,
pursuant to Article 207, paragraph 1, of the aforementioned General Telecommunications Law, hereby lawfully enter into this
CONCESSION AGREEMENT
, which shall be governed by the rules referred to below and by the following clauses:
Chapter I - Purpose
Clause 1.1.
The purpose of this Agreement is the concession of Switched Fixed Telephony Service (
Serviço Telefônico
Fixo Comutado –
STFC), or the STFC, designed for the public use in general, provided in the public system, in the local mode, in the geographic area defined in Clause 2.1., pursuant to the General Licensing Plan.
Sole paragraph.
It is understood that the Switched Fixed Telephony Service, provided in the public system in border and frontier
areas, shall be the subject to this concession, in conformity with the regulation issued by Anatel, pursuant to the provisions included in the General Licensing Plan.
Clause 1.2.
The STFC is the telecommunications service, which, by means of voice and other signals transmission, is designed to allow the communication between determined fixed points by using
telephony processes, pursuant to applicable regulation.
1
Clause 1.3.
Upon Anatel’s prior approval, the Concessionaire may implement and
exploit new services, devices or facilities related to the provision of the service subject to this concession.
Sole
paragraph.
Any services, devices or facilities which, at Anatel’s judgment, are deemed as inherent in or supplementary to the service platform hereby granted, without characterizing any other service or type of service or any added value
service, shall be deemed as related to the subject of this concession, subject to the provisions of applicable regulation, especially the provisions set forth in article 222 of the Brazilian Federal Constitution of 1988.
Clause 1.4.
The Concessionaire is entitled to implement, expand and operate the telecommunications networks required for carrying
out the service, as well as to its industrial exploitation, pursuant to applicable regulation.
Clause 1.5.
The
obligation to meet the universalization and quality targets set forth in this Agreement is inseparable from the service provision.
Clause 1.6.
The Concessionaire shall agree to provide its subscribers, directly or via third parties, on a free basis, with telephone directories of subscribers of all Switched Fixed Telephony
Service providers, in its concession area, subject to applicable regulation.
Paragraph 1.
The
obligation set forth in the preamble shall be deemed as met by providing the subscribers’ access code information service, subject to applicable regulation.
Paragraph 2.
Without prejudice to the provision in the paragraph
above, the supply of the printed Free Mandatory Telephone Directory
(Lista Telefônica Obrigatória e Gratuita-LTOG
), when requested by the subscriber, shall be mandatory.
Clause 1.7.
The Concessionaire shall provide all requestors and users of the provided service with the facilities required for
service provision, pursuant to applicable regulation.
Clause 1.8.
The Concessionaire shall provide free access to
emergency public services set forth in applicable regulation, irrespective of the origin of the call from the Switched Fixed Telephony Service.
Chapter II - Service Coverage Area
Clause 2.1.
The geographical areas for the provision of the service subject to this concession are those comprising the territory(ies) included in Sectors 18, 19, 21, 23, 24, 26, 27, 28 and 29, as
listed in Attachment 2 to the General Licensing Plan, referring to the Concession Agreements PBOA/SPB No. 108/2006-ANATEL, 109/2006-ANATEL 111/2006-ANATEL. 113/2006-ANATEL 114/2006-ANATEL, 116/2006-ANATEL, 117/2006-ANATEL, 118/2006-ANATEL,
119/2006-ANATEL and 12072006-ANATEL.
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Chapter III - Validity and Conditions for Amendments to Agreement
Clause 3.1.
The validity of this concession, granted on an onerous basis, shall end on December 31, 2025.
Clause 3.2.
This Agreement may be amended on June 30, 2011, December 31, 2015 and December 31, 2020 for the
establishment of new conditions, new universalization and quality targets, in view of the conditions then in force, and any supplementary resources shall be defined for the universalization targets, pursuant to Article 81 of Law No. 9,472 of
1997.
Paragraph 1.
Twenty four (24) months before the amendments
set forth in this Clause, Anatel will cause the publication of a public inquiry with its proposal of new conditions and new quality and universalization targets, and these latter shall be submitted to the President of Republic’s approval, by
means of a Decree, pursuant to article 18, item III, of Law no. 9,472 of 1997.
I – The Public Consultation with
the amendment proposals expected for December 31, 2015 will be published by March 31, 2014.
Paragraph 2.
The amendments mentioned in this Clause do not exclude any possible amendment to this Agreement,
at any time, in view of any supervening relevant fact, at Anatel’s discretion.
Paragraph 3.
Anatel shall guarantee the protection of the Concessionaire’s economic situation, pursuant to Chapter XIII of this
Agreement.
Clause 3.3.
The Concessionaire shall pay, every two years, during the concession period, lien
corresponding to two percent (2%) of its revenues, earned in the year before the payment year, from the Switched Fixed Telephony Service, net of any levied taxes and social contributions.
Paragraph 1.
In the event of compliance with the obligation set forth in the main provision costs originating from the application
of new universalization obligations may be considered, pursuant to the General Plan on Universal Service approved by the President of the Republic by means of a Decree.
Paragraph 2.
The calculation of the amount referred to in the preamble to this Clause shall include net revenues arising from application of the basic and alternative service plans subject to this
concession, which includes interconnection revenues, PUC, and also other additional services and operating revenues as determined by the Agency.
Paragraph
3.
The percentage referred to in the preamble to this Clause shall be always calculated in relation to revenues less taxes and contributions, determined between January and December of the prior year and
obtained from the financial statements prepared in accordance with Brazilian corporation law and basic accounting principles, approved by the Concessionaire’s management and audited by independent auditors, and the payment shall mature on
April 30 of the year subsequent to the determination of the lien.
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Paragraph 4.
The first installment of the lien shall mature on
April 30, 2007, calculated including the net revenues determined from January 1 to December 31, 2006, and the subsequent installments shall mature at every twenty four (24) months, with the prior year’s revenues as the
calculation basis.
Paragraph 5.
Any delay in the payment of the lien set forth in
this Clause shall cause the payment of a late payment fine of thirty three-tenths of one percent (0.33%) per day, up to the limit of ten percent (10%), plus the SELIC (Special System for Settlement and Custody) reference rate for federal securities
to be applied on the debt amount considering all delayed payment days.
Chapter IV - Manner, Terms and Conditions of Service
Provision
Clause 4.1.
The use of radiofrequencies in the provision of the service subject to this concession shall
be authorized by Anatel, on onerous basis and without exclusivity, except for any provision to the contrary in applicable regulation, pursuant to articles 83 and 163 of Law No. 9,472 of 1997.
Paragraph 1.
The Concessionaire shall be entitled to the extension, on onerous basis and without exclusivity,
of the radiofrequency usage authorizations used at this Agreement’s execution date and which are necessary for the service provision continuity.
Paragraph
2.
The amount to be paid by the extension mentioned in the paragraph above shall not imply any change to the lien amount referred to in Clause 3.3 of this Agreement.
Paragraph 3.
The right to use radiofrequencies referred to in this
Clause shall not eliminate the prerogative granted to Anatel by article 161 of Law No. 9,472 of 1997.
Paragraph
4.
Any new radiofrequencies to be required by the Concessionaire shall have its usage authorized, on onerous basis, with the compliance with the procedures defined by Anatel for similar authorizations.
Paragraph 5.
The authorizations for usage of the radiofrequencies
subject to this Clause shall expire together with this concession.
Paragraph 6.
The return to Anatel of
any radiofrequencies not required for the continuity of the service provision shall not imply any changes to the lien amount fixed in Clause 3.3.
Clause 4.2.
The Concessionaire shall agree to provide the service subject to this concession in such a way to fully comply with the universalization and continuity obligations inherent in the
public system, which is fully applicable to the Concessionaire, by following the criteria, formulas and parameters defined in this Agreement.
Sole paragraph.
Any noncompliance with the universalization and continuity obligations shall give rise to the application of sanctions set forth in this Agreement, cause Anatel’s intervention
in the Concessionaire, and, if applicable and according to the seriousness
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or if the intervention order is inconvenient, mild or unreasonably beneficial to the Concessionaire or unnecessary, it shall imply the forfeiture of the concession, pursuant to Clause 27.4.
Clause 4.3.
The Concessionaire shall exploit the service subject to the concession at its own account and risk, under
the broad and fair competition system set forth in Law No. 9,472 of 1997 and the General Licensing Plan, and the Concessionaire shall be compensated for the tariffs charged and any possible supplementary or accessory revenues it receives
pursuant to this Agreement.
Sole paragraph.
The Concessionaire shall not be entitled to any exclusivity nor may it
claim any right in connection with the admission of new providers of the same service, in the public or private system.
Clause 4.4.
Throughout the concession validity period, the Concessionaire shall agree to meet the service quality,
comprehensiveness and offering commitments stated in this Agreement, irrespective of the competition environment in the geographical area where the service will be exploited.
Clause 4.5.
The Concessionaire shall agree to keep and preserve all assets, equipment and facilities employed in the service in perfect operating conditions, by maintaining and repairing its units
and promoting, on a timely basis, any replacements required in view of wear and tear or technological obsolescence, or also promoting any repairs or modernizations required to the good performance of the service and the preservation of adequate
service, as set forth in this Agreement.
Chapter V - Rules for Service Implementation, Expansion, Change and Modernization
Clause 5.1.
The expansion and modernization of the service granted are basic requirements of this concession, subject to the
targets and criteria stated in this Agreement.
Sole paragraph.
Anatel may determine any changes to the service
implementation, expansion and modernization targets, subject to the Concessionaire’s right not to be obliged to bear any additional costs not recoverable with the revenues arising from meeting these targets by means of the efficient service
exploitation.
Clause 5.2.
Any changes to the service provision conditions may occur due to Anatel’s determination
or upon its prior express approval.
Clause 5.3.
The service modernization shall be sought through the constant
introduction of equipment, processes and means able to provide the user with a service consistent with the present time, in view of technologies available in the market.
Chapter VI - Service Quality Criteria and Indicators
Clause 6.1.
The proper quality of the service provided by the Concessionaire is a requirement for this concession, and it shall be construed as the service meeting the conditions of regularity, efficiency, security, present time, generality, courtesy and
feasibility of tariffs.
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Paragraph 1.
Regularity shall be characterized by the ongoing
service provision with strict compliance with the rules issued by Anatel.
Paragraph 2.
Efficiency shall be characterized by achieving and preserving any parameters included in this Agreement and by serving the
user within the time limits set forth in this Agreement.
Paragraph 3.
Security in service
provision shall be characterized by the confidentiality of the data related to the usage of services by the users, as well as by the full preserved secrecy of the information transmitted within the scope of its provision, pursuant to the provisions
of Chapter XV.
Paragraph 4.
Present time shall be characterized by modern
equipment, facilities and techniques for service provision, with the use of technological developments arising along the concession period, which, definitely, bring benefits to the users, subject to the provisions in this Agreement.
Paragraph 5.
Generality shall be characterized by the equitable
provision of the service to any and all users, and the Concessionaire shall agree to provide the service to whoever requests it in the location appointed by the requestor, pursuant to the provisions in this Agreement and according to regulation.
Paragraph 6.
Courtesy shall be characterized by the respectful and
prompt service to all users of the service granted, as well as the compliance with the obligations to report and promptly and politely serve everyone who, whether users or not, request any information, arrangements or any type of request to the
Concessionaire, pursuant to the provisions in this Agreement.
Paragraph 7.
The principle of
tariff feasibility shall be characterized by the Concessionaire’s efforts to adopt tariffs lower than those fixed by Anatel.
Clause 6.2.
The Concessionaire shall comply with the General Quality Targets Plan parameters and indicators.
Sole paragraph.
The Concessionaire shall disclose, until April 30 of every year, a statement showing the compliance with the General Quality Targets Plan and the General Plan on Universal
Service, pursuant to applicable regulation.
Clause 6.3.
In addition to the follow-up and control over quality
indicators, Anatel shall evaluate, from time to time, the level of users’ satisfaction with the services hereby granted, and may disclose the Concessionaire’s results, comprising at least the following aspects:
I – user service, especially with respect to access facility, promptness, courtesy, speed and efficiency in responding to requests
and complaints;
II – tariffs and prices charged, as well as any discounts offered;
III – quality of service provided; and
6
IV – adequacy of quality of the services offered to the users’ needs.
Chapter VII - Continuity of Services
Clause 7.1.
The continuity of the services hereby granted, an essential element to its provision, shall be characterized by the non-interruption of services, subject to any suspension due to
users’ default, pursuant to Clause 9.2 and article 3, item VII of Law No. 9,472 of 1997.
Sole paragraph.
Any
exceptional interruption of the service, arising from an emergency situation due to technical or installation security reasons, shall not be deemed as a breach of continuity if the Concessionaire reports the users affected and, in relevant cases,
also forwards a detailed notice to Anatel. Under the rules issued by Anatel and the Brazilian Consumer Defense Code, users will be assured of the right to obtain credit in proportion to the time during which the service was not available and of
the eventual reimbursement of any amounts unduly paid.
Clause 7.2.
Under no circumstances may the Concessionaire
interrupt the provision of services by alleging any noncompliance by Anatel or the Federal Government with any obligation, and the exception for contractual default may not be invoked by the Concessionaire.
Chapter VIII - The Universalization Targets
Clause 8.1.
The service universalization is an essential feature of the service provision system hereby granted and shall be characterized by the consistent and equitable service to all users and
by meeting the targets stated in the General Plan on Universal Service, attached hereto, approved by the Executive Branch, pursuant to articles 18, item III, and 80 of Law No. 9,472 of 1997.
Clause 8.2.
The implementation costs related to the universalization targets stated in the General Plan on Universal Service,
attached hereto, shall be the responsibility of the Concessionaire.
Clause 8.3.
In addition to the provisions in
Clause 8.2, the Concessionaire shall agree to implement universalization targets not set forth in this Agreement to be required by Anatel, subject to the following:
I – Anatel will inquire the Concessionaire on the total costs for implementing the intended additional targets and on the portion of these targets that may not be repaid by the exploitation revenues,
but will be covered by a specific payment, specifically pointing out the purposes to be met and the selected technologies, as well as the implementation location and time;
II – if, upon expiration of the period fixed in the inquiry, the Concessionaire fails to state a position, then Anatel will take any required measures to determine the liens and costs with the
implementation of these targets, as well as to estimate the corresponding revenue generation;
7
III – if the Concessionaire responds the inquiry, Anatel will check whether the
submitted costs and revenue estimates are accurate and consistent, taking into account the available technologies, prices of inputs and labor force, geographic and socio-economic characteristics of the demand to be met, prices charged in the market
and other variables deemed as relevant;
IV – in the event it does not deem the costs and/or revenue estimate as
reasonable, Anatel may reasonably demand the implementation of targets to the Concessionaire, defining the refund amount, subject to the provisions in Chapter XXXIII; and
V – if, according to Anatel, the refund amounts are accurate and consistent, Anatel will confirm to the Concessionaire the demand for implementation of these specific targets, pursuant to the
proposed refund forwarded to the Concessionaire.
Paragraph 1.
If, after the procedure set forth in
this Clause, Anatel deems the implementation of a specific universalization target through the Concessionaire as inconvenient or not feasible, then Anatel shall contract such target with another party by means of specific and limited service
licenses, subject to economic parameters obtained from the procedure set forth in this Clause.
Paragraph 2.
At
Anatel’s discretion, the procedure set forth in this Clause may also be used to define the refundable amounts in the event the targets set forth in this Agreement are accelerated.
Clause 8.4.
The adoption of the procedures set forth in the foregoing Clause shall be Anatel’s option, which may adopt it at
its discretion and according to the best public interests, and the Concessionaire shall not be entitled to any preference right in the implementation of these targets.
Chapter IX - Rules on Suspension of Services due to Default and at Subscriber’s Request
Clause 9.1.
Any subscriber to the service subject to this concession may obtain, upon request and at any time, the suspension of service, pursuant to applicable regulation.
Clause 9.2.
Subscribers not in default with the Concessionaire who request the suspension of their service will be ensured the
reestablishment of their service at the same address and the maintenance of their access code, pursuant to applicable regulation.
Clause 9.3.
The Concessionaire may only suspend service to a subscriber who fails to meet the debt payment directly arising from the use of the service granted, subject to applicable regulation,
and following the criteria aimed at preserving the subscribers’ rights, as follows:
I – the subscriber shall be
guaranteed a period to challenge the debts charged against him/her;
8
II – the subscriber in default shall be entitled to preserve its access code, pursuant
to applicable regulation; and
III – the subscriber in default shall not be encumbered with the payment of the monthly
subscription fee for the period the Switched Fixed Telephony Service is suspended.
Paragraph 1.
The Concessionaire shall report the disconnection to the user in advance, as set forth in applicable regulation.
Paragraph 2.
Any default of debts not directly related to the service subject to this concession, pursuant to paragraphs 1, 2 and 3 of Clause 11.6, shall not give rise to any suspension of service
addressed in this Clause.
Clause 9.4.
The Concessionaire shall ensure the subscriber the right to have the access to
offered services, devices and facilities temporarily or permanently blocked, as well as to any added value services, whenever requested by the subscriber, pursuant to applicable regulation.
Clause 9.5.
In the event the subscriber’s default is solely related to the payment of services provided by a Switched Fixed
Telephony Service provider other than the one provided and which is subject to joint billing by the Concessionaire, then the suspension of service shall follow the specific procedure subject to Anatel’s regulation.
Chapter X - The Numbering Plan
Clause 10.1.
The Concessionaire shall agree to comply with the Numbering Regulation for the Switched Fixed Telephony Services, and shall provide the subscriber with the access code portability,
pursuant to applicable regulation.
Paragraph 1.
The Concessionaire shall bear the costs arising
from applicable regulation referred to in the preamble to this Clause.
Paragraph 2.
Any costs
related to the resources required to enable the access code portability implementation and operation may be fully assumed by the Concessionaire in the event it is related to the latter’s network.
Paragraph 3.
Any costs related to common resources required to the access code portability implementation and
operation shall be assumed by the service providers, pursuant to applicable regulation.
Paragraph 4.
Any costs related to management of the consignation and occupation process of the Numbering Resources described in the Numbering Regulation for the Switched Fixed Telephony Services shall be assigned to the Concessionaire, pursuant to the
Numbering Resources management rules defined by Anatel.
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Chapter XI - Tariffs System and Collection from Users
Clause 11.1.
The Concessionaire must offer to all users the Basic Local Service Plan, Attachment 3, which is an integral part of
this Agreement.
Sole paragraph.
The Basic Local Service Plan shall be unique for the each sector of the PGO referred
to in Clause 2.1 and contain, under the terms defined by Anatel, maximum values for each tariff structure item defined for the provision of the Switched Fixed Telephony Service, and these values shall be reviewed and adjusted in conformity with
applicable rules.
Clause 11.2.
The Concessionaire may offer to its users the Alternative Local Service Plan, with
characteristics different from those stated in the Basic Local Service Plan.
Paragraph 1.
The
subscriber shall be entitled to move along the several Plans for Local Services offered by the Concessionaire, pursuant to applicable regulation.
Paragraph 2.
The structure for tariffs, values and other characteristics associated to the Alternative Local Services Plans shall be proposed by the Concessionaire at its discretion, subject to the
provisions in Clause 11.1.
Paragraph 3.
The Concessionaire shall agree to offer to users its
Alternative Local Services Plans, on a equitable basis and subject to the terms defined by the Concessionaire.
Paragraph 4.
The Alternative Local Service Plans shall be authorized by Anatel.
Paragraph
5.
After the fifteen (15)-day period elapses, counted from the receipt of the proposal, without Anatel stating its position on the request, the Alternative Local Services Plans may be traded and shall remain
subject to Anatel’s approval.
Paragraph 6.
In view of the society’s needs for
services, Anatel may define specific alternative plans to be implemented by concessionaires, pursuant to applicable regulation.
Clause 11.3.
The Concessionaire may grant discounts to tariffs of the Local Service Plans, provided that they are granted on an
equal and equitable basis, with the subjective reduction of values being barred, and subject to the fair competition principle.
Sole paragraph.
In compliance with regulation, the Concessionaire shall agree to disclose any tariff discounts to its users in
advance, by giving them broad and previous advertising and reporting this decision to Anatel no longer than seven (7) days after the date the reduced tariff comes into effect.
Clause 11.4.
The Concessionaire shall agree to broadly advertise the tariffs charged by the service subject to this concession,
pursuant to Anatel’s regulation.
Clause 11.5.
Upon implementation of new services, devices or facilities related
to the service subject to this concession, the Concessionaire shall submit the proposed tariff to
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Anatel’s approval, without which the Concessionaire will not be able to charge any tariff or price thereof.
Clause 11.6.
The bill invoices issued by the Concessionaire shall be detailed, clear, explanatory and sealed, and detail the type and quantity of each service provided to the subscriber, pursuant
to applicable regulation.
Paragraph 1.
Pursuant to this Agreement, the Concessionaire shall
clearly and explicitly state in the bill invoice the amounts due by the subscriber to other collective interest telecommunications service providers, with fair and equitable conditions guaranteed.
Paragraph 2.
The Concessionaire may state in the bill invoice, provided it is clearly and explicitly stated,
any amounts due by the subscriber in view of other services, devices or facilities related to the service provided.
Paragraph 3.
The inclusion of any amounts in the bill invoice related to the provision of added value services or any other amounts due that do not originate exclusively from the STFC shall be
prohibited without the express subscriber’s consent.
Paragraph 4.
The Concessionaire shall provide to subscribers
of any Service Plans, either on its website or, upon the subscriber’s request, in written form, at least monthly and free of charge, the bill invoice with minimum detailing level to enable the identification, for each call, of the telephone
number called, the date and time it was made, the duration of the call and respective value, pursuant to applicable regulation.
Paragraph 5.
The Concessionaire shall be prohibited from charging for the supply of the invoice referred to in the previous paragraph, except for any events expressly set forth in applicable
regulation.
Clause 11.7.
The Concessionaire shall charge network usage fees from other telecommunications service
providers, subject to applicable regulation.
Clause 11.8.
The Concessionaire shall offer a discount to any subscriber
affected by possible interruptions in the service provided, provided that these interruptions had not been caused by the subscriber, and these discounts shall be proportional to the interruption period, pursuant to applicable regulation.
Chapter XII - Tariff Adjustment
Clause 12.1.
At each interval not shorter than twelve (12) months, by Anatel’s or the Concessionaire’s initiative, subject to the economy legislation in force, the tariffs stated in
the Basic Local Service Plan, Attachment 3 hereto, may be adjusted based on the formulas below:
Of which:
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And also:
Where:
t = proposed date for adjustment.
t
o
= last adjustment date.
MIN = value of minute of local service usage, net of taxes levied.
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PRESt
o
= percentage of trunking subscribers of the Basic Local Service Plan in relation to the Concessionaire’s total
subscribers, since the last adjustment.
PNRESt
o
= percentage of trunking subscribers of the Basic Service Plan in relation to the Concessionaire’s total subscribers,
since the last adjustment.
PTRONCOt
o
= percentage of Class n subscribers of the Basic Local Service Plan in relation to the Concessionaire’s total
subscribers, since the last adjustment.
PAICEt
o
= percentage of Class n subscribers of the Basic Local Service Plan in relation to the Concessionaire’s total
subscribers, since the last adjustment.
PCNt
o
= percentage of Class n subscribers of the Basic Local Service Plan in relation to the Concessionaire’s total
subscribers, since the last adjustment.
Ass = average subscription value.
AssRes = value of Residential Subscription, net of taxes levied.
AssNRes = value of Non-residential Subscription, net of taxes levied.
AssTronco =
value of Trunking Subscription, net of taxes levied.
AssAice = value of Special Subscription, net of taxes levied.
AssCn = value of class n Subscription, net of taxes levied.
HABRes = value of connection fee for residential terminal, net of taxes levied.
HABNRes = value of connection fee for non-residential terminal, net of taxes levied.
HABTronco = value of connection fee for trunking terminal, net of taxes levied.
HABAice = value of connection fee for trunking terminal, net of taxes levied.
VTP = value of tariff unit for calls originated from collective accesses.
nt
o
= average number of minutes billed per subscription to the Basic Local Service Plan, including the total minutes
equivalent to calls made in reduced time and the total minutes equivalent to the completion tariff of local calls originated by Special class subscribers, taking into account the time range between the last and the proposed adjustment.
Where:
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IST = telecommunications service ratio, composed based on existing price
ratios, pursuant to applicable regulation.
k = X + FA = transfer factor.
FA = repayment factor.
Paragraph 1.
For the period from January 1, 2006 to December 31, 2007, the X transfer factor shall be defined by Anatel based on a simplified methodology that includes, among others, the
physical and economic data related to the products monthly subscription and usage minute, as well as material, personal, services and depreciation factors.
Paragraph 2.
As from January 1, 2008, the X transfer factor shall be defined by Anatel based on a methodology that considers the optimization of service provision costs, pursuant to applicable
regulation.
Paragraph 3.
In the event the value resulting from the calculation
of the X transfer fact is negative, the value zero (0) shall be adopted.
Paragraph 4.
The
repayment factor value is:
I – zero (0) for IST variations, in the period under analysis, up to ten percent (10%);
II – one hundredth (0.01) for IST variations, in the period under analysis, higher than ten percent (10%) and up to
twenty percent (20%).
III – two hundredth (0.02) for IST variations, in the period under analysis, higher than twenty
percent (20%).
Paragraph 5.
In the event the adjustment period involves different transfer factors
values, the transfer factor value shall be calculated by using the following formula:
Where:
X
1
= transfer
factor year 1
X
2
= transfer factor year 2
n
1 =
number of
months year 1
n
2
= number of months year 2
Paragraph 6.
In the event the last adjustment date is earlier than the date this Agreement came into effect, the adjustment shall be progressively applied taking into account the periods involved
and the respective prevailing formulas and criteria.
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Paragraph 7.
New criteria for tariff follow-up, including
transfer factor values, may be defined by Anatel upon any amendment to this Agreement, pursuant to Clause 3.2, taking into account the conditions prevailing at the time.
Paragraph 8.
Tariff freedom, when applicable, shall be subject to a Normative Ruling from Anatel.
Clause 12.2.
The follow-up of Local Network Usage Fees shall comply with the provisions in Clause 25.2 and in applicable
regulation.
Sole paragraph.
New follow-up criteria of the Local Network Usage Fees may be defined by Anatel upon any
amendment to this Agreement, pursuant to Clause 3.2. and taking into account the conditions prevailing at the time.
Clause
12.3.
The follow-up of the STFC tariffs in the local mode, in calls involving other telecommunications services, shall comply with specific regulation.
Chapter XIII - Protection to the Concessionaire’s Economic Situation and Tariff Review
Clause 13.1.
The preservation, under a fair competition system, of the fair equivalence between service provision and compensation is a basic requirement of this Agreement, and the unjust
enrichment at the other party’s or the service users’ expense shall be barred, pursuant to the provisions in this Chapter.
Paragraph 1.
The Concessionaire shall not be obliged to bear any losses arising from this Agreement, except if those losses arise from any of the following factors:
I – its own negligence, ineptitude or omission in exploiting the business;
II – any risks which are usual to the business activity;
III – inefficient management of its business, including the one characterized by the payment of operating and administrative costs inconsistent with market parameters; or
IV – its failure to take advantage of market opportunities, including the expansion, broadening and improvement in the provision of
the service subject to this concession.
Paragraph 2.
The Concessionaire’s unjust enrichment
shall be prohibited if it arises from the following factors:
I – achieving economic gains not directly arising from its
business efficiency, especially when resulting from new rules issued on the service; and
II – transferring revenues to
third parties, to the detriment of the principle of tariff feasibility, pursuant to paragraph 7 of Clause 6.1.
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Paragraph 3.
The Concessionaire shall be entitled to have its
original charges and remuneration situation restored when acts of God or catastrophes significantly affect the service exploitation, always subject, as a benchmark, to the effects of these situations on service providers in the private system.
Paragraph 4.
The adequacy of the recovery referred to in the paragraph above shall be evaluated
taking into account, among other factors, any existing coverage of the event which triggered the change to the initial financial position by the Insurance Plan set forth in Clause 24.1.
Clause 13.2.
The restoration to the financial situation of the Agreement shall be applicable when it is evidenced that the factors
stated in paragraph 1 of the preceding Clause did not occur, and such restoration shall be preferably carried out through tariff review or any other mechanism which, at Anatel’s discretion, is deemed to be efficient to neutralize the then noted
situation.
Paragraph 1.
The tariff review shall keep back any other mechanism to neutralize the
parties’ unjust enrichment, by causing the event it referred to become obsolete.
Paragraph 2.
The arrangement adopted to neutralize any distortion shall be unique, complete and final with respect to the event giving rise to such distortion.
Clause 13.3.
Irrespective of the provisions in Clause 13.1 above, there shall be a review of the tariffs comprising the Basic Local Service Plan in favor of the Concessionaire or the users,
pursuant to article 108 of Law No. 9,472 of 1997, in the event of one of the following specific situations:
I –
unilateral amendment to this Agreement imposed by Anatel, involving significant variation (for above or below) of costs or revenues, so that the rise or drop in tariffs is imposed due to the need to prevent the unjust enrichment of any of the
parties;
II – change to the tax system subsequent to the execution of this Agreement giving rise to any increase or
reduction in the Concessionaire’s potential profitability;
III – supervening events, arising from any de facto or
administrative events, which proven result in change to the Concessionaire’s costs;
IV – any specific legislative
event directly impacting the Concessionaire’s revenues in such a way that it will affect its continuity or the quality of the service provided; or
V – any legislative change resulting in benefits to the Concessionaire, including any changes granting or eliminating exemptions, reductions, discounts or any other tax or tariff privilege, pursuant
to paragraph 3 of article 108 of Law No. 9,472 of 1997.
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Paragraph 1.
Any loss or decrease in the Concessionaire’s
gains caused by the free exploitation of services under fair conditions or by the inefficient management of its business shall not give rise to a tariff review.
Paragraph 2.
The event of tariff review set forth in item II of the preamble to this Clause shall not be
applied if the tax change implies the creation, elimination, increase or decrease in taxes levied on the Concessionaire’s income or earnings, such as income tax, which do not imply administrative or operating encumbrance.
Paragraph 3.
No tariff review shall be applied in the events set forth in this Clause when the events
triggering the review are already covered by the Insurance Plan set forth in Clause 24.1.
Paragraph 4.
The Concessionaire’s contributions to the Universal Telecommunications Service Fund (FUST) and the Fund for the Technological Development of Telecommunications (FISTEL) shall not give rise to tariff review.
Clause 13.4.
The tariff review shall not be applicable upon characterization that the impacts causing the Concessionaire’s
request may be neutralized by the efficient exploitation of service, the market expansion or generation of alternative or supplementary revenues associated to the service subject to this Agreement, subject to current competitive conditions.
Sole paragraph.
The decrease in revenues arising from discounts or reduced tariffs shall not give rise to tariff
review.
Clause 13.5.
The tariff review procedure may be started upon Concessionaire’s request or Anatel’s
determination.
Paragraph 1.
When the tariff review procedure is started by the Concessionaire, the
following requirements shall be met:
I - being supported by a technical report or expert appraisal report fully showing the
impact of the event on the tariff composition or the Concessionaire’s revenue estimate;
II – being supported by all
documents required for showing the reasoning of the request;
III – the Concessionaire shall state its intended tariff
review, by reporting the impacts and possible alternatives for tariff balancing; and
IV – all costs on diligence and
studies required for the full finding of facts shall be the responsibility of the Concessionaire.
Paragraph 2.
The tariff review procedure started by Anatel shall be reported to the Concessionaire granting a
time limit for it to state a position, supported by a copy of the appraisal reports and studies conducted to characterize the situation giving rise to the tariff review.
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Paragraph 3.
The tariff review procedure shall be concluded no
longer than one hundred twenty (120) days, except for the event in which the extension of this deadline is required to supplement the finding of facts.
Paragraph 4.
The requirement shall be approved by Anatel, and the Concessionaire shall provide the broad
disclosure of the new maximum reviewed tariff values, pursuant to the provisions in this Agreement.
Chapter XIV - Alternative,
Supplementary and Accessory Revenues
Clause 14.1.
The Concessionaire may obtain other alternative sources of
revenues, provided that it does not imply the noncompliance with any provisions stated in the Telecommunications Services Regulations and other rules issued by Anatel.
Paragraph 1.
The Concessionaire, its affiliates, subsidiaries or controlling parties shall not condition,
directly or indirectly, the service offer hereby granted to the matched consumption of any other service, pursuant to applicable regulation and the Brazilian Consumer Defense Code.
Paragraph 2.
The service offer hereby granted jointly with other services shall comply with the provisions in applicable
regulation and the Brazilian Consumer Defense Code.
Clause 14.2.
Anatel may determine that the Concessionaire offers
services, devices or facilities related to the service subject to this concession to users, and in this case the parties shall adjust the unit prices of these services, subject to market parameters and the right to fair remuneration.
Chapter XV - Users’ and Other Service Providers’ Rights and Guarantees
Clause 15.1.
Subject to the rules and parameters included herein, the following are the rights entitled to users of the service
subject to this concession:
I – access to service and its fruition within the quality, regularity and efficiency
standards set forth in this Agreement, attachments hereto and rules in force;
II – to obtain by request the suspension of
the service provided by the Concessionaire or the rescission of the service agreement;
III – equitable treatment in
connection with the conditions to service access and fruition;
IV – obtaining appropriate information with respect to
service provision conditions, tariffs and prices charged;
V – inviolability and secrecy of their communications, subject
to any constitutional and legal event and conditions and breach of telecommunications secrecy;
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VI – freely obtaining the non-disclosure of their access code, upon request forwarded
to the user service center provided by the Concessionaire;
VII – non-suspension of service without the user’s
request, except for the event of any debt directly arising from its use or noncompliance with the duties stated in article 4 of Law No. 9,472 of 1997;
VIII – being previously aware of any and all changes to service provision conditions, which directly or indirectly affect him/her;
IX – privacy in bill invoices and in the usage of their personal data by the Concessionaire;
X – efficient and ready response to requests and complaints by the Concessionaire;
XI – forwarding of any complaints or representations against the Concessionaire to Anatel and defense consumer bodies;
XII – cure of any damages arising from the breach of their rights;
XIII – having the terms of the service agreement met;
XIV – freely choosing the provider of national and international long-distance telephony services;
XV – having its right to access code portability respected, subject to applicable regulation;
XVI – not being obliged or induced to consume services or acquire any assets or equipment he/she is not interested in, nor being compelled to submit to any conditions in exchange of which he/she will
receive the service subject to this concession, pursuant to applicable regulation and the Brazilian Consumer Defense Code;
XVII – the replacement of its access code, pursuant to applicable regulation;
XVIII – obtaining, previously to the collection, any information on the re-inclusion of debts challenged when the complaint is deemed
as groundless; and
XIX – the billing of services outside regulatory time limits shall be submitted in a separate invoice
and upon prior negotiation with the user.
Paragraph 1.
The Concessionaire shall comply with the
duty to strictly care for the secrecy inherent in the telephony service and for the confidentiality of the data and information, by employing means and technologies to guarantee this user’s right.
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Paragraph 2.
The Concessionaire shall provide the technological
resources required for suspending the secrecy of telecommunications determined by judicial authority, pursuant to applicable regulation.
Paragraph 3.
In addition to the legal, contractual and regulatory provisions, the Concessionaire shall comply with the other consumer protection rules, especially Law No. 8,078 of
September 11, 1990 and Decree No. 6,523 of July 31, 2008.
Clause 15.2.
In addition to the rights
referred to in the preceding Clause, the other telecommunications services providers shall be entitled to the following rights:
I – interconnection to the Concessionaire’s network under economic and operating equitable conditions, under proper technical
conditions and at equal and fair prices that strictly meet the service provision requirements, subject to the regulation issued by Anatel;
II – receiving the service requested from the Concessionaire on an equitable basis, at market or other prices negotiated by the parties and including any applicable reductions in view of prevented
costs, including those arising from large consumption, subject to applicable regulation;
III – obtaining all information
required for provision of the services operated by these providers, including those related to billing, except for the Concessionaire’s right to preserve its data covered by business secrecy, as well as third parties’ rights; and
IV – accessing the Concessionaire’s telecommunications networks under non-discriminatory and egalitarian conditions,
in a manner coherent with its business practices, pursuant to the General Plan on Competition Targets to be issued by Anatel.
Paragraph 1.
Any conflicts arisen between the Concessionaire and other service providers shall be settled on the administrative level by Anatel, pursuant to applicable regulation.
Paragraph 2.
Anatel may, based on an injunction, establish the conditions required for settling the conflict,
including the definition of amounts, deadlines and any other elements fundamental to the effectiveness of the injunction decision.
Paragraph 3.
Anatel shall follow up, on an ongoing basis, the relationship between service providers using the service hereby granted and the Concessionaire, in order to prevent any behaviors which
may give rise to unfair losses to any of the parties or breaches of the economic order and free competition, by reporting, in these events, such behaviors to the Administrative Economic Defense Council (CADE), after exercising its jurisdiction,
pursuant to article 19, item XIX of Law No. 9,472 of 1997.
Clause 15.3.
Subject to applicable regulation, any
user shall be entitled to the provision and fruition of added value services, which shall be carried out under technically
20
proper conditions and at equal and fair prices, and the Concessionaire shall be prohibited to establish any obstacle or restriction to the fruition of the service hereby granted.
Sole paragraph.
Added value services shall be construed as all activities adding new facilities to the service subject to this
concession, without mingling with it, in connection with the access, storage, presentation, handling or recovery of information.
Chapter
XVI - Concessionaire’s Rights, Guarantees and Obligations
Clause 16.1.
In addition to other obligations
arising from this Agreement and inherent in the service provision, the Concessionaire shall be responsible for:
I –
providing the service with full compliance with the provisions in this Agreement, by fully complying with the regulation issued by Anatel;
II – implementing all equipment and facilities required for the provision, continuity, modernization, expansion and universalization of the service subject to this concession, within the
specifications stated in this Agreement;
III – keeping the telecommunications network in perfect operating and working
conditions, with respect to the quantity, extension and locations pertinent and sufficient to the proper service provision;
IV
– providing the financial resources required to meet the universalization and continuity parameters stated in this Agreement and to the proper service provision;
V – providing Anatel with, in the manner and frequency set forth in regulation, any technical, operating, economic, financial and accounting accounts and information, as well as supplying all
requested data and elements related to the service;
VI – providing public usage terminals, permanent or temporary, in the
format set forth in this Agreement;
VII – submitting itself to Anatel’s inspection, monitoring and control by
enabling the access by Anatel’s agents to the facilities related to the service, as well as to its accounting, technical, commercial, economic-financial and operational records, among others;
VIII – keeping separate accounting records for the STFC mode subject to this Agreement, according to the defined chart of accounts,
as well as having the inventory of the company’s fixed assets and components updated, pursuant to applicable regulation;
IX – keeping a user service and information system as set forth in Clause 16.7;
X – caring for the integrity of assets related to the service provision;
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XI - submitting, for Anatel’s approval, prior to its usage, the draft of the Standard
Agreement to be entered into with subscribers, as well as all changes, amendments or variations applicable thereto;
XII –
submitting, for Anatel’s prior approval, any operating, service, association or partnership agreements intended to be entered into with foreign entities;
XIII – forwarding, for publication in Anatel’s Library, a copy of the agreements and contracts related to the provision of the services hereby granted with Brazilian and foreign
telecommunications service providers;
XIV – forwarding, for publication in Anatel’s Library, a copy of the
agreements and contracts related to the provision of the services hereby granted, involving waiver or transfer of revenues, in amounts higher than three million reais (R$3,000,000.00) per year;
XV – disclosing, directly or by means of third parties, the access code of its subscribers and other subscribers to the Switched
Fixed Telephony Service providers, in public or private system, in the concession area, excluding those who expressly require the omission of their personal data;
XVI – supplying, within reasonable time limits and prices and on a non-discriminatory basis, the list of its subscribers for disclosure of telephony directory purposes;
XVII – strictly respecting the duty of secrecy and confidentiality of telecommunications, subject to legal and contractual
provisions;
XVIII – respecting the subscriber’s privacy in relation to bill invoices and all personal information
related thereto;
XIX – meeting, at its own account, pursuant to Clause 8.2. of this Agreement, all universalization
targets expressly stated in this Agreement;
XX – implementing service expansion and universalization projects to be
determined by Anatel, according to defined refund levels, time limits and implementation conditions, subject to the provisions in Clause 8.3;
XXI – previously submitting to Anatel any and all intended amendments to its bylaws in connection with the spin-off, merger, change, take-over, as well as the transfer of control or change to capital
stock;
XXII – respecting all rights entitled to other telecommunications service providers, refraining from any
inequitable behavior or any measure to prevent the latter’s activities;
XXIII – using, whenever required by
regulation, any equipment with certification issued or approved by Anatel;
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XXIV – complying with the technical rules and standards in force in Brazil, refraining
from any inequitable measure in relation to assets and equipment produced in the Country;
XXV – making available, to
civil defense authorities, agents, and any institutions providing Emergency Public Services, all requested means, systems and features to support or help affected populations in the event of public catastrophes;
XXVI – serving, with priority, the President of the Republic, protocol representatives, cortège and supporting staff, as well
as foreign Chiefs of State, upon any official visits or moves around the country, by providing all the means required for the proper communication of these authorities, subject to the regulation issued by Anatel;
XXVII – paying all inspection and license fees related to its facilities, pursuant to applicable regulation;
XXVIII – paying all amounts related to public prices, especially for the right to use scarce resources;
XXIX - publishing, on an annual basis, irrespective of the corporate legal system to which it is subject, the balance sheet and financial
statements computed at the end of each fiscal year, subject to provisions in legislation in force and regulation issued by Anatel;
XXX – complying with the rules prevailing in the country related to the use of foreign labor force, including those for higher qualified positions;
XXXI – indemnifying users, subject to applicable regulation, for any damages effectively arising from the failure to provide the
service required based on the continuity parameters and universalization targets set forth in this Agreement;
XXXII –
curing any damages caused by breach of the users’ rights;
XXXIII – refraining from having expenses on management
service agreements with foreign entities, including technical assistance, in amounts higher than one-tenth of one percent (0.1%) per year, in relation to the annual revenues of the Switched Telecommunications Services, until the end of the
concession;
XXXIV – complying with any agreements entered into with Brazil and other countries and international bodies,
as set forth by Anatel;
XXXV – making available at least six (6) maturity dates, for the user to choose from, in the
service bill invoice;
XXXVI – promptly serving all users’ requests recorded in the Anatel’s Service Center,
responding them in writing;
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XXXVII – supplying data, information, reports and accounting records whenever requested
by Anatel, within the stated time limit, under the penalty of incurring the sanctions set forth in this Agreement; and
XXXVIII
– submitting to Anatel all contracts, agreements or adjustments entered into by the Concessionaire and its controlling parties, direct or indirect, or affiliates, especially those addressing the administration, management, engineering,
accounting, advisory, purchasing, supplies, constructions, loans, sales of shares, goods, as well as any agreements executed with:
a) individuals or legal entities which, together with the Concessionaire, are part, directly or indirectly, of the same controlled company; and
b) individuals or legal entities with directors or administrators in common from the Concessionaire.
Paragraph 1.
The decisions related to item XXXIII of this Clause in service provision and technical assistance
agreements, between the Concessionaire and third parties related to controlling shareholders, shall be made at extraordinary shareholders’ meetings, and the Concessionaire shall state in its bylaws that preferred shares shall be entitled to
vote in these decisions, without prejudice to the provisions in article 115, paragraph 1, of Law No. 6,404, of December 15, 1976, as amended by Law No. 10,303, of October 31, 2001.
Paragraph 2.
In the event of any conflicts between the Concessionaire and other telecommunications services
providers with respect to the fixation of fair and reasonable values, Anatel may, based on an injunction, determine such amounts, deadlines and any other elements fundamental to the effectiveness of the injunction decision.
Clause 16.2.
Without prejudice to the other provisions included herein and the guarantees ensured by force of law, the
Concessionaire has the following rights:
I – exploiting the services granted within its business strategy, by freely
defining its investments, subject to the regulation issued by Anatel and the provisions in this Agreement;
II –
appointing a representative to monitor Anatel’s inspection activity, except in those cases when the previous summons or the on-site monitoring are incompatible with the nature of the determination, or when confidentiality is required to ensure
the effectiveness thereof; the Concessionaire is ensured access to the corresponding report upon completion of the diligence.
III – suspending or failing to serve the service provision request from any subscriber who is in default with its contractual
obligations with the Concessionaire, pursuant to applicable regulation;
IV – requesting the convening of an arbitration
procedure in the events and pursuant to the provisions of Chapter XXXIII hereof;
24
V – having the financial conditions to exploit services preserved against any changes
giving rise to the unjust enrichment of the Federal Government or users, pursuant to the provisions in Chapter XIII;
VI –
requesting the review of the tariffs applicable to the service hereby granted, pursuant to the provisions in this Agreement;
VII – requesting from Anatel the confidentiality of information gathered during the inspection activity, pursuant to the provisions
in this Agreement;
VIII – employing, during the carrying out of services, any third party’s equipment and
infrastructure, subject to Clause 22.1 hereof; and
IX – contracting, with third parties, the development of activities
inherent in, accessory or supplementary to the service, as well as the implementation of associated projects.
Clause 16.3.
While this Agreement is in force, the Concessionaire shall be the sole responsible, before third parties, for the acts performed by its staff, assigns and contractors, during the provision of the Switched Fixed Telephony Services, as well as for
the use of equipment, facilities or networks, and the Federal Government and Anatel shall be held harmless from any related claims and/or indemnities.
Clause 16.4.
The Concessionaire may not place any obstacles to public interest works, whatever their nature, whenever the removal of facilities or telephone networks is required to enable any
direct or indirect intervention by any Public Administration body or entity.
Clause 16.5.
The Concessionaire shall
directly negotiate with each Municipal Authorities of the service exploitation areas, as well as with other public service concessionaires, the conditions for installation of poles and crossheads for supporting its aerial lines and cables, as well
as any underground ducts and drain pipes designed for passage of cables under streets and public places.
Paragraph 1.
The Concessionaire shall make arrangements with the holders of public or private assets above and
under which it has to give passage to ducts or drain pipes or install supports for placement of ducts or drain pipes in order to obtain their respective consent or right-of-way for such purposes.
Paragraph 2.
The Concessionaire shall make, with the respective municipal authorities, the arrangements needed
to establish conditions to overcome any interferences on the network required for providing the service, including those related to tree cutting and pruning.
Paragraph 3.
All constructions, facilities and use of equipment for the service provision shall be the entire
responsibility of the Concessionaire, at its own account and risk, and it is expressly understood that the Concessionaire shall be responsible for the relationship with federal, state or municipal bodies liable for usage of soil, buildings and
environmental control.
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Clause 16.6.
The Concessionaire may use any poles, ducts, canals and right-of-ways
belonging or controlled by other telecommunications or public service providers, subject to applicable regulation.
Sole
paragraph.
The Concessionaire shall make available to other telecommunications service providers, classified by Anatel as of collective interest, its proprietary means or the means it controls, referred to in the preamble to this Clause.
Clause 16.7.
The Concessionaire shall provide assistance to users during the entire term of this concession, in the
following forms, pursuant to applicable regulation:
I – information and service center to be accessed free of charge
twenty-four (24) hours a day and seven (7) days a week, qualified to receive and process requests and complaints submitted by users;
II – personal attention that allows users to have a person-to-person interaction concerning the provision of STFC; and
III – any other means of distance communication.
Paragraph 1.
The Concessionaire shall make available, in a clear and objective manner, to all users:
I – the access code to its user information and service center, as well as access information to other means of distance
communication, which must be included in the service agreement, the bill invoice, the Free Mandatory Telephone Directory (
Lista Telefônica Obrigatória e Gratuita -
LTOG), the Concessionaire’s website, and in all the printed
documents and materials submitted at the moment of contracting the service and during its duration; and
II – the
addresses of the customer service centers on its website and through the user information and service center.
Paragraph 2.
All requests or complaints forwarded by users by any means shall receive a sequential order number, which shall be communicated to users at the beginning of service to enable them to
follow its development, pursuant to applicable regulation.
Paragraph 3.
The user shall be informed
by the Concessionaire, within the legal and regulatory timeframes, as to the measures adopted in regard to his or her request or complaint.
Paragraph 4.
In the event it identifies the users’ difficulty to access the user information and service center, Anatel may require the Concessionaire to expand the available means of access,
under penalty of deeming that the Concessionaire failed to meet the obligation set forth in this Clause.
Clause 16.8.
Upon contracting the services and acquiring equipment and materials related to the services subject hereto, the Concessionaire shall agree to take into
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account any bids from independent, including Brazilian, suppliers, and base its decision, with respect to the several submitted bids, on meeting the objective price and delivery criteria and
technical specifications set forth in the applicable regulation.
Paragraph 1.
In the event of
equal bids, the Concessionaire shall agree to use, as a decision criterion, the preference to services offered by companies located in the country, equipment, software and materials produced in the country and, among which, those with Brazilian
technology.
Paragraph 2.
The equivalence referred to in this Clause shall be determined, when, on a cumulative basis:
I – the Brazilian price is equal to or lower than the imported price, placed in the Brazilian territory, including any
taxes levied;
II – the delivery period is consistent with the service requirements; and
III – the technical specifications defined in the applicable regulation are met and have certification issued or accepted by Anatel,
if applicable.
Paragraph 3.
Services are construed as those related to the research and
development, planning, project, physical implementation and installation, operation, maintenance, as well as the acquisition of software, supervision and evaluation tests of the telecommunications systems.
Paragraph 4.
The Concessionaire shall make available, on a quarterly basis, by means of electronic systems to
be used exclusively by Anatel, the list of goods and services acquired that are directly related to the offer of telecommunications services to the Concessionaire, including at least the following information:
I – The goods manufacturer or service provider;
II – A general description of the goods or service;
III – the value of
the goods or service;
IV - whether the goods are imported or manufactured in the Country;
V – Whether the goods have a local technology certificate, pursuant to the rules issued by the Ministry of Science and Technology or
another entity designated for this purpose; and
VI – The total consumption in the period, breaking down the values of
goods and services according to the criteria set forth in items IV and V.
Clause 16.9.
The payment or transfer of
amounts due to other telecommunications service providers shall be the Concessionaire’s obligation, pursuant to applicable regulation, and any non-payment or unreasonable withholding shall be characterized
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as an obstacle to competition, which will subject the Concessionaire to the sanctions set forth in Clause 26.1.
Clause 16.10.
Upon request, the Concessionaire shall agree to supply and guarantee updated information in its subscriber reference files, required to the provision of telecommunications service by
the collective interest service providers with which it has network interconnections, and this supply shall be carried out by means of equal, fair and reasonable conditions, pursuant to applicable regulation.
Paragraph 1.
The obligation referred to in this Clause shall be met no longer than thirty (30) days
counted from the request, irrespective of the completion of negotiation between the parties.
Paragraph
2.
The supply shall be on an onerous basis, based on fair and reasonable values, subject to the provision in paragraph 2 of Clause 16.1.
Paragraph 3.
The obligation shall be deemed as met through the implementation, together with other service providers, of a central reference file.
Clause 16.11.
Upon request, the Concessionaire shall make available, to collective interest telecommunications service providers
with which it has network interconnections, any billing, collection, service and payment services, under equal, fair and reasonable conditions, pursuant to applicable regulation and applicable tax legislation.
Sole paragraph.
The services referred to in this Clause shall be implemented up to thirty (30) days after its request,
irrespective of the completion of negotiations between the parties or possible requests for settlement of conflicts submitted to Anatel, subject to the provisions in paragraph 2 of Clause 16.1.
Clause 16.12.
The Concessionaire shall ensure to any other collective interest telecommunications service provider the
interconnection with its own network, subject to specific regulation and the rules of this Agreement.
Sole paragraph.
In the event the Concessionaire fails to conclude, within the regulatory time limits, the interconnection agreement and fails to objectively prove the existence of any technical obstacle, Anatel shall establish, based on an injunction, a time
limit for the interconnection implementation, irrespective of the completion of business negotiations or of any possible requests for arbitration submitted to Anatel.
Clause 16.13.
The Concessionaire shall agree to provide the collective interest telecommunications service providers with the resources required for interconnection under the industrial
exploitation format, pursuant to applicable regulation.
Sole paragraph.
In the event the Concessionaire fails to
provide the resources within the regulatory time limits and to objectively prove the inexistence of service capacity, Anatel shall cautiously establish the conditions for the request to be met, including, if required, the values to be charged.
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Clause 16.14.
The Concessionaire shall agree to provide the resources required for
implementation of the telecommunications networks, including the access network, of collective interest service providers under industrial exploitation format, pursuant to applicable regulation.
Paragraph 1.
In the event the Concessionaire fails to provide the
resources within sixty (60) days counted from the request, and fails to objectively prove the inexistence of service capacity, Anatel shall establish, based on an injunction, the conditions for the request to be met, including, if required, the
values to be charged.
Paragraph 2.
The service agreement date between the user and the
service provider shall define the chronological order the Concessionaire has to follow to meet the requests for resources.
Paragraph
3.
In the event of multiple requests for the same user, the Concessionaire shall agree to provide the requested resources by following the chronological order of requests from the service providers.
Clause 16.15.
The Concessionaire shall agree to comply with the General Competition Targets Plan and implement
the resale of the service subject to this concession, pursuant to applicable regulation.
Clause 16.16.
The
Concessionaire shall provide access, on a non-discriminatory basis and pursuant to applicable regulation, to information relating to its subscribers list, required for the disclosure of telephone directories.
Paragraph 1.
The access referred to in this Clause shall be implemented no longer than thirty (30) days
after the related request, provided that any existing impediment is objectively evidenced.
Paragraph
2.
The access shall be made on an onerous basis, based on fair and reasonable values.
Paragraph
3.
In the event of conflicts between the Concessionaire and parties interested in disclosing its subscribers list, with respect to the definition of fair and reasonable values, Anatel may cautiously
determine such values.
Chapter XVII - Anatel’s Obligations and Prerogatives
Clause 17.1.
In addition to other prerogatives inherent in its role as a regulating body and other obligations arising from this
Agreement, Anatel shall be responsible for:
I – following up and inspecting the service provision and the safekeeping of
reversible assets, aiming at meeting the rules, specifications and instructions set forth in this Agreements and attachments hereto;
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II – carrying out the inspections aiming at checking the adequacy of facilities and
equipment, requiring any needed corrections, repairs, removals, reconstructions or replacements, to the Concessionaire’s expense;
III – regulating, on an ongoing basis, the provision of the service granted;
IV – interfering in the carrying out of the services when required, in order to ensure its regularity and the full compliance with
this Agreement and any applicable legal rules;
V – applying the penalties set forth in the service regulation, in the
Brazilian Consumer Defense Code, and, specifically, in this Agreement;
VI – resolving on any Alternative Local Service
Plans submitted by the Concessionaire;
VII – fixing, authorizing the adjustment and reviewing tariffs, under the terms
and pursuant to this Agreement;
VIII – operating within the scope set forth in this Agreement in order to prevent the
unjust enrichment of the parties, pursuant to this Agreement;
IX – ensuring the good quality of the service and
responding to the requests and complaints of users, informing them of the measures taken;
X – declaring the end of the
concession in the events set forth in this Agreement;
XI – ensuring the interconnection guarantee, by settling any
possible controversies arising between the Concessionaire and other service providers;
XII – ensuring the compliance with
the universalization targets set forth in this Agreement, and with any targets to be established in any subsequent Targets Plans;
XIII – following, on an ongoing basis, the relationship between the Concessionaire and other telecommunications service providers, by settling any conflicts and establishing, based on an injunction,
values, time limits and any other conditions fundamental to the effectiveness of the injunction decision.
XIV –
prohibiting any Concessionaire’s behavior contrary to the competition system, subject to the legal jurisdiction of the Administrative Economic Defense Council (CADE);
XV – upon the Concessionaire’s request, proposing to the President of the Republic, through intermediation of the Ministry of Communications, the declaration of public interest for purposes of
expropriation or institution of administrative easement of any assets required for the implementation or maintenance of the service subject to this Agreement;
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XVI –exercising the inspection activity over the service, pursuant to the provisions in
this Agreement;
XVII – collecting any taxes related to FISTEL, FUST and other fees to be created, which collection
responsibility lies with Anatel, by adopting any measures set forth in legislation in force;
XVIII – ordering the
Concessionaire to adopt any arrangements intended to protect the public interest or ensure the fruition of service, subject to provisions in regulation and in this Agreement;
XIX – ordering the Concessionaire to compensate users for any noncompliance with the obligations in this Agreement and regulation;
XX – ordering the intervention in the Concessionaire in the events set forth in article 110 of Law No. 9,472 of 1997 and in this
Agreement;
XXI – collecting any amounts related to public prices, especially related to the right to use scarce
resources;
XXII – determining any changes or the rescission of contracts, agreements or amendments entered into between
the Concessionaire and its controlling shareholders, direct or indirect, or affiliates, especially those addressing the administration, management, engineering, accounting, advisory, purchasing, supplies, constructions, loans, sales of shares,
goods, in the event they are contrary to legislation, regulations, the economic order or the public interest; and
XXIII –
determining the cancellation of the sale operation conducted or the replacement of the asset sold by the Concessionaire with an equivalent one, as well as amendments or rescission of contracts, agreements or adjustments executed between the
Concessionaire and a third party, when they are contrary to legislation, rules, regulations, the economic order or the public interest.
Chapter XVIII – The Concessionaire
Clause 18.1.
The Concessionaire is a company incorporated according to Brazilian laws, as a corporation, and its exclusive purpose is the exploitation of the service subject to this concession,
except for the services stated in article 207, paragraph 3, of Law No. 9,472 of 1997.
Sole paragraph.
If any
Concessionaire’s statutory change is approved, the documents formalizing such change shall be forwarded to Anatel for filing, and shall become an integral part of this Agreement, pursuant to applicable regulation.
Clause 18.2.
The Concessionaire and its controlling parties shall agree to keep, during at least the full concession period, all
conditions for service provision and capacity existing at the time this Agreement came into effect.
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Clause 18.3.
The Concessionaire and its controlling parties shall agree to ensure,
during the concession period, the effective existence and operation, in the national territory, of the centers for resolution and implementation of strategic, managerial, logistics, commercial, operating and technical decisions involved in the
enforcement of this Agreement, including causing this obligation to impact the composition and decision-making procedures of its management bodies.
Sole paragraph.
The Concessionaire shall maintain, in its bylaws, during the validity period of this Agreement, the provisions ensuring the compliance with the preamble to this Clause.
Chapter XIX – Transfer of the Concessionaire’s Concession and Control
Clause 19.1.
The transfer of the Concessionaire’s concession or control, either direct or indirect, may be authorized by
Anatel, subject to the General Licensing Plan and Law No. 9,472 of 1997, whenever:
I – the assignee meets all
requirements defined in articles 97 and 98 of Law No. 9,472 of 1997; and
II – to the extent that it does not
jeopardize competition or risk the enforcement of the Agreement and the general rules of protection to the economic order.
Sole paragraph.
The noncompliance with any provision in this Clause shall give rise to the forfeiture of this concession.
Clause 19.2.
Any Concessionaire’s shares, which transfer does not change its control, may be freely pledged in
guarantee.
Sole paragraph.
In the event of shares pledged in guarantee giving rise to encumbrances of the
Concessionaire’s equity, provisions submitting the creditors, in the event of execution, to the rules stated in this Chapter shall be set forth in the Financing Agreements.
Chapter XX - Inspection Activities
Clause 20.1.
Anatel shall
inspect the service hereby granted in order to ensure the compliance with the universalization and continuity obligations inherent in the public system of its provision, as well as care for the compliance with the targets and commitments stated in
this Agreement.
Paragraph 1.
The inspection to be exercised by Anatel shall comprise the inspection and follow-up of
activities, equipment, facilities, agreements and the Concessionaire’s economic and financial situation, either by means of direct operation of its inspection agents or by formal request, implying broad access to all Concessionaire’s and
third parties’ data and information, which shall be timely provided, as requested, pursuant to the provisions in this Agreement.
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Paragraph 2.
Any information gathered during the inspection shall
be published in the Library, except for those deemed as confidential by Anatel, upon the Concessionaire’s request.
Paragraph 3.
Any information to be deemed as confidential, in accordance with the foregoing paragraph, shall be only used in the procedures related to this Agreement, and Anatel and others
appointed by Anatel shall be responsible for any disclosure, either broad or restricted, of such information outside the scope of utilization.
Paragraph 4.
Anatel’s inspection shall also comprise the follow-up and control over the Concessionaire’s actions in the technical, accounting, commercial and economic and financial areas,
and it may establish guidelines and procedures required to carry out the inspection, as well as suspend any and all activities inconsistent with the requirements of universalization, quality, efficiency, security and continuity of the service.
Paragraph 5.
The Concessionaire’s accountability shall be submitted separately for the STFC
mode subject to this Agreement and follow the chart of accounts established pursuant to applicable regulation, as well as record and calculate, separately, the investments and costs of its several network components.
Paragraph 6.
The Concessionaire shall agree to provide relevant information to Anatel, pursuant to applicable
regulation, and among them:
I - economic, financial and accounting information, including information on the balance sheet,
statements of income, indebtedness, cash flow and added value, among others;
II – commercial information, including the
installed users base, by type and concession sector, net and gross revenues, total number of minutes and calls charged with tariffs, and number of default subscribers by service plan;
III – technical operating information, including installed capacity, external plant, switch and transmission ports, plans to
introduce new technologies by service and sector; and
IV – other information, such as the number of the
concessionaire’s employees and employees contracted by activity.
Paragraph 7.
Anatel’s
inspection shall not be construed as reducing or exempting the Company’s responsibilities with respect to the adequacy of its works and facilities, the accuracy and lawfulness of its accounting records and its financial and commercial
operations.
Paragraph 8.
It is the Concessionaire’s duty to provide any information within the timeframe defined
by Anatel.
Clause 20.2.
By intermediation of the appointed representative, the Concessionaire may follow up
Anatel’s inspection activities, except in those cases when the previous summons or the on-site monitoring are incompatible with the nature of the
33
determination, or when confidentiality is required to ensure the effectiveness thereof, and may not bar or prevent the inspection, under the penalty of incurring the penalties set forth in this
Agreement.
Chapter XXI – Concessionaire’s Accountability
Clause 21.1.
Pursuant to applicable regulation and in the manner defined by Anatel, the Concessionaire shall forward to Anatel,
from time to time, information and detailed and statistical reports on the STFC mode subject to this Agreement, among which:
I
– indicators of expansion, comprehensiveness and occupation of the telephony network;
II – technical data related to
the contracting and usage of the service subject to this concession, broken down by subscriber class, type of service plan contracted, tariff structure item, type of communication and usage time;
III – data related to the usage of the Concessionaire’s networks and resources, broken down by type of service providers
involved, type of communication, type and comprehensiveness of the resource used, usage time and other applicable criteria;
IV
– technical data related to items of additional, supplementary and accessory revenues, pursuant to this Agreement;
V
– the statement of income detailing revenues and respective expenses related to the items mentioned in items I, II, III and IV of this Clause;
VI – the monthly standard balance sheet, the quarterly information (ITR), the financial statements for each fiscal year and other information and documents related to each fiscal year, duly audited;
VII – data related to financial operations carried out by the Concessionaire, including those related to the issue of
debt securities;
VIII – data which enables the characterization of the technological stage of the equipment used, as well
as the operation level of the plant; and
IX – data related to the quantity and qualification level of the human resources
used, either the concessionaire’s or from third parties’.
Paragraph 1.
The provision of
data mentioned in this Clause shall not exempt or reduce the Concessionaire’s responsibility as to the adequacy, accuracy and lawfulness of its accounting records, and financial and commercial operations.
Paragraph 2.
The noncompliance with the requests, recommendations and determinations contained in this Clause
shall subject the Concessionaire to the application of the sanctions set forth in this Agreement.
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Clause 21.2.
The provision of the requested information shall, whenever possible,
become ongoing and automated processes for information provision, as suggested by the Concessionaire, and be either adopted or not, at Anatel’s discretion.
Chapter XXII – Concession-Related Assets
Clause 22.1.
All
assets belonging to the Concessionaire’s equity, as well as to the Concessionaire’s controlling party, subsidiary, affiliate or third parties, and which are fundamental to the provision of the service hereby granted, especially those
qualified as such in Attachment 1 hereto – Qualification of Reversible Assets in the Provision of Local Switched Fixed Telephony Services, shall be an integral part of this concession and be related thereto.
Paragraph 1.
The list of concession-related assets also includes authorizations to use radiofrequencies
granted and, if possible, the right to use orbital positions, subject to the provisions in articles 48 and 161 of Law No. 9,472 of 1997, and also the provisions in Clause 4.1 hereof.
Paragraph 2.
The activities and processes required to the provision of STFC in the public system are an
integral part of the concession, aiming to ensure business continuity, taking into consideration that these are essential items and that their provision is constantly subject to technological changes.
Paragraph 3.
In relation to the concession-related assets, the Concessionary may only directly employ, in the
provision of the service hereby granted, any non-proprietary equipment, infrastructure, software or any other asset upon the express prior consent by Anatel, which may waive such requirement in the cases and events set forth in regulation.
Paragraph 4.
In the event of any risk to the continuity of services or prevention from the
reversal of the concession-related items, Anatel may refuse authorization for use of third parties’ assets or then demand that the respective agreement includes a clause by which the owner agrees, in the event of the end of the concession, to
keep the agreements and subrogate Anatel in the rights arising therefrom.
Paragraph 5.
Pursuant to
applicable regulation, the Concessionaire shall agree to submit a list including the concession-related assets on a yearly basis, according to definition of Clause 22.1.
Paragraph 6.
Applicable regulation shall address the identification and control over reversible assets,
especially with respect to sale, encumbrance or replacement of assets, which shall depend on Anatel’s prior approval, and these assets shall be clearly identified in the list submitted by the Concessionaire on a yearly basis.
Paragraph 7.
Any assets linked to the provision of services and with their usage shared by the Concessionaire
shall comprise the list submitted by the Concessionaire on a yearly basis.
Clause 22.2.
The Concessionaire shall agree
to submit to Anatel, on a quarterly basis, from the eighteenth (18th) year of validity of this Agreement:
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I – a list including all assets belonging to its equity and which are fundamental to
the provision of the service hereby granted, especially those qualified as reversible assets of the Provision of Switched Fixed Telephony Services in the Local Mode;
II – a report on the inventory of parts and replacement and expansion parts;
III – a financial report, including the indebtedness level and meeting of obligations with third parties; and
IV – a report including information on human resources and staff qualification.
Chapter XXIII – Reversal of Assets
Clause 23.1.
Upon the end of the concession, all concession-related assets, pursuant to Chapter XXII, shall automatically reverse to Anatel, and the Concessionaire shall remain with the right to
the indemnities set forth in legislation and in this Agreement.
Sole paragraph.
Up to one hundred eighty
(180) days after the end of the concession, an inspection of the concession-related assets shall be carried out and a Statement of Return and Reversal of Assets shall be drawn up including a statement of the conservation status of such assets,
and the Concessionaire’s representative(s) shall have the option to monitor such inspection.
Clause 23.2.
The
Concessionaire shall agree to deliver the reversible assets in perfect operation, usage and maintenance conditions, without prejudice to the normal wear and tear resulting from its usage.
Sole paragraph.
The reversible assets shall be transferred to Anatel free from any liens or charges, subject to the event of
paragraph 2 of the Clause below.
Clause 23.3.
The reversal of assets addressed in this Chapter, at the end of the
contractual period, shall be carried out without indemnity, except for the provisions in this Clause.
Paragraph 1.
The Concessionaire shall be indemnified only in the event there shall be, at the end of the
concession, any assets not fully repaid, which acquisition had been previously authorized by Anatel to ensure the continuity and updating of the service provided.
Paragraph 2.
Alternatively or complementarily to the indemnity referred to in the foregoing paragraph, Anatel
may accept the transfer of assets which have been pledged as guarantee of its own financing, subrogating the financial installment still unpaid.
Clause 23.4.
At the end of the concession, Anatel shall evaluate the assets referred to in Clause 22.1, and may refuse the reversal of assets it deems as dispensable or unserviceable for
application in the exploitation of the service, and the Concessionaire shall be entitled to the adversarial right, including by preparing and submitting, at its expense, any appraisal reports or studies supporting the need for reversal.
36
Sole paragraph.
In the event the Concessionaire disagrees with Anatel’s decision
with respect to the foregoing in this Clause, it may request the application of the resource for settlement of disputes provided for in this Agreement.
Chapter XXIV - Insurance Plan
Clause 24.1.
During the whole
validity period of this concession, the Concessionaire shall have, with an insurance company of a size consistent with the capital to be insured, registered with the sector regulatory bodies, the following insurance policies required for ensuring
the effective and comprehensive coverage of risks inherent in the development of all activities stated in this Agreement:
I
– “all risks” type insurance for material damages, covering the loss, destruction or damages to any or all concession-related assets, and this insurance shall include all coverage required in accordance with international standards;
II – insurance to preserve the economic conditions for the ongoing exploitation of services, by covering at least the
operating costs against any changes in the Concessionaire’s revenues arising from claims or changes in the Agreement exploitation conditions which are not covered by insurance against material damages, provided that the adoption of this type of
insurance be accepted by Brazilian legislation and expressly authorized by the Brazilian reinsurance authority, the Instituto de Resseguros do Brasil – IRB, or a similar body; and
III – surety bonds ensuring the compliance with obligations related to the quality and universalization set forth in this Agreement
(Performance Bond, credit letter and amount pledged as guarantee) in the amount corresponding to ten percent (10%) of the investments estimated at each year for compliance with the targets set forth herein.
Paragraph 1.
The Concessionaire shall, upon renewal of the insurance policies, submit a declaration of the
Insurance Company having the obligation to report to the Concessionaire and Anatel, in writing, with at least thirty (30) days in advance, any facts which may give rise to the total or partial cancellation of the contracted insurance policies,
reduction in coverage, increase in deductible amounts or reduction in insured amounts.
Paragraph 2.
The Concessionaire shall also, upon renewal of the insurance policies, submit an express declaration by the Insurance Company that it is fully aware of the Concession Agreement and of Anatel’s regulations, including in regard to the
Concessionaire’s limitations and rights.
Paragraph 3.
In the event of the
Concessionaire’s noncompliance with the obligation to keep the insurance policies in force, Anatel, irrespective of its right to order the intervention or forfeiture of this concession, may contract and directly pay the respective premiums, and
the Concessionaire shall bear the related costs.
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Paragraph 4.
The Concessionaire shall submit a certificate issued
by the insurance company(ies) confirming the settlement of the premium(s) related to the policy(ies) within sixty (60) days of their settlement.
Paragraph 5.
Any insurance policies required to guarantee the effective and comprehensive coverage over risks inherent in the development of all activities stated in this Agreement shall be in
force submitted to Anatel, in full, within thirty (30) days of their issuance.
Paragraph 6.
The Concessionaire undertakes to submit, by the date of expiration of each policy, a declaration of the insurance company(ies) stating that said policy is being renewed.
Paragraph 7.
Anatel may change the coverage or submission periods of the insurance policies referred to in
this Clause, in order to adjust such requirements to the regulation issued by the Superintendence of Private Insurance (SUSEP), as well as upon the issue of any rules preventing the contracting of insurance policies referred herein or the
inexistence of conditions for a broad and competitive market to enable its contracting at reasonable costs.
Paragraph 8.
Annually, until the end of November, the Concessionaire shall submit an estimate for the
following year of the amount of investments required to comply with the obligations herein, which will subsidize the contracting of the guarantee provided for in item III of this Clause.
Chapter XXV - Interconnection
Clause 25.1.
The Concessionaire shall
agree to allow, facilitate, make available and carry out the interconnection, to the network it operates, of networks of other collective interest telecommunications service providers, in public or private system, and comply with and cause the
compliance with the rules and regulations issued by Anatel accordingly.
Clause 25.2.
As of a date to be determined by
Anatel, new values will be adopted for the network usage fee for Local Network Usage Fees (TU-RL), which consider the long-term cost model, set forth in applicable regulation and the terms and the provisions in Clause 13.1.
Paragraph 1.
The maximum values of the Local Network Usage Fees (TU-RL) shall be limited to the output of
multiplier M by the local service usage fees, subject to the time modulation and other conditions stated in Attachment 3 hereto and in applicable regulation, as follows:
I – from January 1, 2006 to December 31, 2006, M shall be equal to five tenths (0.5);
II – from January 1, 2007 up to the date when the Cost Model is implemented, to be determined by Anatel, M shall be equal to four tenths (0.4).
Paragraph 2.
In the event the application of the provision in paragraph above gives rise to an increase in the
TU-RL value, this value may only be charged from the next adjustment of the local service usage fees.
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Paragraph 3.
In the event of adoption of tariffs related to the
maintenance of the usage right including the total usage minutes, the TU-RL values shall be defined based on the reference quantity of usage minutes.
Clause 25.3.
The Concessionaire shall have the same rights and comply with the same interconnection conditions as other collective interest telecommunications service providers.
Sole paragraph.
The Concessionaire shall make available, for the interconnection, the network elements with the highest possible
technical breakdown level, subject to Anatel’s regulation.
Clause 25.4.
In the event of unreasonable refusal for
interconnection, and without prejudice to other measures, Anatel may order the intervention in the Concessionaire.
Sole
paragraph.
The unreasonable refusal for interconnection is characterized by:
I – the failure to submit the
interconnection agreement within the time limits established by regulation;
II – the failure to provide the
interconnection within the time limits established by regulation;
III – the noncompliance with any injunction involving
the interconnection provision, determined by Anatel.
Clause 25.5.
The unreasonable refusal for interconnection shall
be deemed as a serious breach, and the Concessionaire shall be subject to the sanctions set forth in Chapter XXVI hereof, without prejudice to other measures to be adopted by Anatel.
Sole paragraph.
In the event the unreasonable refusal for interconnection involves bad faith, the provision in article 177 of Law
No. 9,472 of 1997 shall also apply.
Chapter XXVI – Sanctions
Clause 26.1.
Upon enforcement of this Agreement, the Concessionaire shall agree to be subject to the following sanctions, which
will be applied based on Anatel’s well-founded decision, and have its right to defense guaranteed, under the provisions of its Bylaws and without prejudice to other penalties set forth in regulation:
I – for any breach of the provisions herein resulting in the failure to meet the universalization targets: fine of up to fifty
million reais (R$50,000,000.00);
II – for any act or omission contrary to the provisions stated in this Agreement, or any
other normative ruling giving rise to losses to competition in the telecommunications sector: fine of up to fifty million reais (R$50,000,000.00);
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III – for breach of any contractual provisions giving rise to noncompliance with
quality targets and parameters in service provision: fine of up to forty million reais (R$40,000,000.00);
IV – for any
other act or omission not stated in the items above giving rise to breach of user’s rights defined in this Agreement or result in losses to the user: fine of up to thirty million reais (R$30,000,000.00);
V – for any act or omission which breaches the provision in Clause 16.8 of this Agreement, with respect to the contracting of
services and acquisition of equipment and materials produced in the country: fine of up to thirty million reais (R$30,000,000.00);
VI – for any act or omission giving rise to obstacles or difficulties in the exercise of Anatel’s inspection activity set forth in this Agreement: fine of up to twenty million reais
(R$20,000,000.00);
VII – for any act or omission giving rise to noncompliance with Anatel’s determination: fine of
up to twenty million reais (R$20,000,000.00);
VIII – for any act, omission or negligence which poses risk to the safety
of facilities: fine of up to fifteen million reais (R$15,000,000.00);
IX – for any act or omission giving rise to damages
or pose risk to any assets and equipment related to the concession: fine of up to ten million reais (R$10,000,000.00); and
X
– for noncompliance with any obligation expressly set forth herein, except for those stated in the items above, which sanctions are already defined therein: fine of up to ten million reais (R$10,000,000.00).
Paragraph 1.
The breach stated in item I of this Clause shall be characterized when the Concessionaire fails
to meet its obligations, within the time limits set forth in this Agreement, with respect to the service expansion, expansion of service provision, by means of public usage telephones and services to locations, pursuant to the General Plan on
Universal Service and Attachment 02 – Universalization Targets, which is an integral part of this Agreement, and the sanction shall be applied taking into account the following factors in addition to the general principles stated in this
Chapter:
a) the difference between the implementation stage noted and the target defined in the Agreement;
b) the possible recovery of the implementation schedule to the Concessionaire’s expense;
c) the damage for the policy reflected in the General Plan on Universal Service;
d) any damages to the direct beneficiaries of the unachieved targets; and
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e) any possible technical or economic circumstances that may mitigate the
Concessionaire’s responsibility without eliminating it.
Paragraph 2.
The breach stated in
item II above shall have its seriousness defined solely in view of the general criteria stated in the specific regulations, and shall be characterized by the Concessionaire’s behavior that, directly or indirectly, may give rise to losses to
competition in the sector, especially:
a) placing any obstacle or difficulty to the option for another service provider or
national or international long-distance service;
b) refusal to provide interconnection to any telecommunications service
provider;
c) placing any obstacle or difficulty to the activity carried out by added value service providers;
d) refusal or delay in extending, under equal conditions, the co-billing to other collective interest providers, characterized by its
failure to implement it within up to thirty (30) days counted from the related request;
e) refusal or delay in providing
and updating, whether on real time or not, the information in its subscriber reference files, required to the activities of other collective interest service providers, characterized by its failure to implement it within thirty (30) days
counted from the related request;
f) refusal or delay in providing, under equal conditions, the resources needed for the
implementation of telecommunications networks, including access network, of collective interest service providers, under industrial exploitation format, characterized by its failure to implement it within up to sixty (60) days counted from the
related request;
g) conditioning the provision of the service or offering advantages in view of the user’s acquisition of
any other service alien to this Agreement;
h) carrying out any telecommunications service not subject to the concession
granted by Anatel in its favor;
i) failure to preserve the quality levels achieved in its own network with respect to
interconnection;
j) delaying the delivery or providing inadequate information essential to the activities of other service
providers, especially with respect to reference files; and
l) unreasonable failure to pay any amounts due to another
telecommunications service provider.
Paragraph 3.
The breach stated in item III of this Clause
shall be characterized by the recurrent provision of the service granted in levels below the quality parameters defined in
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the General Quality Targets Plan or by the proven breach of the indicators referred to in Chapter VI, and the first one shall be deemed as a serious breach, especially:
a) the non-allocation of human and material resources required for preservation of minimum quality standards in the operation or service
maintenance;
b) negligence to modernize the network, affecting the service quality;
c) the gathering and forwarding of indicators to Anatel in nonconformity with regulation;
d) the refusal, omission or delay in providing information on quality; and
e) the noncompliance of the duty to maintain the continuity or regularity in the provision of service, except in the event of the
circumstances set forth in the sole paragraph of Clause 7.1.
Paragraph 4.
The breach stated in the
foregoing item IV shall have its seriousness scale defined in view of the number of users affected and losses caused, and the either committed or omitted, or direct or indirect, breach of any obligation set forth in this Agreement, which does not
imply an offense to universalization and quality duties, but gives rise to breaches of the users’ rights, especially:
a)
the refusal to provide the service granted to any interested party;
b) the noncompliance with the duty to provide information
to user;
c) the breach of telecommunications secrecy, outside the legal events, albeit carried out by third parties in the
facilities of responsibility of the Concessionaire;
d) the noncompliance with the duty to supply, free of charge, telephone
directories to any subscriber who requests it;
e) the failure to maintain a user information and service center pursuant in
the manner defined in this Agreement;
f) the billing of tariff or price not in compliance with the rules set forth in this
Agreement and regulation;
g) the restriction to the right of exercising free choice among service plans and service providers;
h) the failure to compensate users, pursuant to applicable regulation or as determined by Anatel;
i) the failure to guarantee the access code portability right, pursuant to applicable regulation; and
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j) the noncompliance with the Agency’s determinations, according to the terms and
conditions set forth.
Paragraph 5.
The sanction set forth in item V above shall be characterized
when the breach of the obligation stated in Clause 16.8 and have its seriousness defined pursuant to applicable regulation.
Paragraph 6.
The breach stated in the foregoing item VI shall have its seriousness defined in view of the relevant of the fiscal activity, which had been prevented, and be characterized by the
breach, either committed or omitted, or direct or indirect, carried out by the Concessionaire or its assigns, preventing the inspection activity exercised by Anatel, its assigns, agents or even by the user, especially:
a) the Concessionaire’s refusal to meet a request for information made by Anatel with respect to the service granted or any related
assets;
b) placing any obstacle to the operation of Anatel’s inspection agents;
c) failure to comply with any advertising obligations set forth herein or in regulation; and
d) failure to forward or the untimely forwarding of any information, data, report or document, which, by force of regulation or this
Agreement, should have been forwarded to Anatel.
Paragraph 7.
The breach stated in item VIII of
this Clause shall have its seriousness defined in view of the proportional risk arisen and be characterized by the Concessionaire’s behavior against the rules set forth in this Agreement and regulation, that breaches the technical safety rules
and standards and poses risk to the facilities related to the service granted, especially:
a) the employment, in the service
granted, of any equipment not certified or approved by Anatel pursuant to applicable regulation;
b) the non-allocation, in
service operation and maintenance, of the human and material resources required for preservation of minimum quality standards; and
c) failure to adopt any precautions recommended for the service hereby granted.
Paragraph 8.
The breach stated in the foregoing item IX of this Clause shall have its seriousness defined in view of the significance, economic relevance and essence of the involved assets and be
characterized by the Concessionaire’s behavior against the provisions in this Agreement or regulation and which may pose risk to the assets or equipment related to this concession or make it difficult to reverse such assets or equipment,
especially in view of:
a) the failure to maintain inventory and records of the assets referred to in Clause 22.1;
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b) the employment, directly in the provision of the service subject to this concession, of
third parties’ assets without the prior consent by Anatel or without the waiver of such consent;
c) the negligence in the
preservation of the reversible assets, subject to applicable regulation; and
d) the failure to provide the information set
forth in Clause 22.1.
Paragraph 9.
The sanction set forth in the foregoing item X shall be
characterized when the breach of the contractual obligation not stated in the foregoing items is identified, especially:
a)
noncompliance with the provisions in item XXX of Clause 16.1; and
b) refusal or delay in enabling the access, pursuant to
applicable regulation, to the information of its subscribers’ list required for purposes of disclosure of telephone directories.
Paragraph 10.
The sanction set forth in the foregoing item VII shall be characterized by the noncompliance with Anatel’s determination, especially with respect to the one aiming at
guaranteeing the respect to the users’ rights.
Paragraph 11.
The sanction set forth in the
foregoing item II has a contractual nature and shall be applied by Anatel, irrespective of any arrangements to be adopted by CADE.
Clause 26.2.
For application of the contractual fines set forth in this Chapter, the rules stated in Title VI of Book III of Law No. 9,472 of 1997 and in regulation shall be complied with.
Sole paragraph.
For application of the sanctions set forth in this Chapter, the provisions in Anatel’s Bylaws and
in the applicable regulation shall be taken into account.
Clause 26.3.
The fines set forth in this Chapter shall be
applied without prejudice to the characterization of the intervention events or declaration of forfeiture set forth in this Agreement.
Sole paragraph.
In the event of total or partial failure to carry out the adjustment or of any unreasonable delays longer than one hundred twenty (120) days to meet the targets set forth in
this Agreement, the Concessionaire shall be subject to declaration of forfeiture pursuant to Clause 27.4.
Clause 26.4.
The maximum amounts of the fines set forth in this Chapter are basic for June 1998 and shall be adjusted based on the IGP-DI (general price index – internal availability) rate.
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Chapter XXVII – End of Concession
Clause 27.1.
The Concession Agreement shall be deemed as ended in the following events:
I – end of service concession period;
II – expropriation, pursuant to article 113 of Law No. 9,472 of 1997;
III – forfeiture, pursuant to article 114 of Law No. 9,472 of 1997, and in this Agreement;
IV – amicable or judicial termination, pursuant to article 115 of Law No. 9,472 of 1997; and
V – annulment.
Paragraph 1.
At the end of the concession, Anatel shall be returned the rights and duties related to the provision of the service granted, with the reversal of assets referred to in Clause 23.1,
and the Concessionaire shall have the right to any indemnities set forth in legislation and in this Agreement.
Paragraph 2.
After the end of the concession, Anatel shall carry out any required investigations, evaluations and settlements within one hundred eighty (180) days counted from the assumption
of the service, except for in the event of end of contractual period, when these arrangements shall be adopted in advance by Anatel.
Paragraph 3.
In the event the agreement is ended before the contractual period, without any prejudice to other applicable measures, Anatel may:
I – occupy temporarily movable and immovable assets and use any staff contracted for the provision of services, required to its
continuity; and
II – keep the agreements entered into by the Concessionaire with third parties during the terms and under
the conditions originally agreed.
Clause 27.2.
The reversal, at the end of the contractual period, shall be carried
out without any indemnity, except for in the event set forth in Clause 23.3.
Clause 27.3.
Pursuant to article 113 of
Law No. 9,472 of 1997, expropriation shall be construed as the recovery of the service by Anatel during the concession period, in view of any extraordinary reason of public interest, by means of a specific authoritative law and preceded by an
indemnity payment.
Clause 27.4.
This Agreement may have its forfeiture declared by means of an act of Anatel’s
Steering Committee, preceded by an administrative proceeding which shall guarantee full defense to the Concessionaire, in the following events:
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I – transfer of corporate control, spin-off, merger, concessionaire’s change or
take-over or decrease of its capital stock without Anatel’s prior approval;
II – irregular transfer of the
Agreement;
III – noncompliance with transfer commitments referred to in Clause 19.1 and article 87 of Law No. 9,472
of 1997;
IV – Concessionaire’s bankruptcy or winding-up;
V – failure to meet insurance coverage requirements, in noncompliance with the obligations set forth in Clause 24.1, and in the event
such failure may not, at Anatel’s discretion, be cured by intervention;
VI – upon occurrence, pursuant to article
114, item IV, of Law No. 9,472 of 1997, of any of the events set forth in Clause 28.1 and if, at Anatel’s discretion, the intervention is deemed as inconvenient, mild or unreasonably beneficial to the Concessionaire; and
VII – noncompliance with the universalization targets stated in the General Plan on Universal Service approved by Decree of the
President of the Republic.
Paragraph 1.
The intervention shall be deemed as unnecessary when the
demand for the service subject to this concession may be met, upon permission, by other service providers on a regular and immediate basis.
Paragraph 2.
The declaration of forfeiture shall not eliminate the application of any proper penalties, pursuant to this Agreement, in connection with the breaches carried out by the
Concessionaire, nor shall it jeopardize the indemnity right defined pursuant to the Chapter below.
Clause 27.5.
The
Concessionaire shall be entitled to contractual termination, either amicable or judicial, when, due to action or omission by the Government, the enforcement of the agreement becomes excessively onerous, pursuant to article 115 of Law No. 9,472
of 1997.
Sole paragraph.
The introduction or expansion of competition among the several providers of the service
subject to this concession shall not be deemed as grounds for contractual termination, and it is certain that the Company, upon assuming this concession, is aware that it will exercise activities without any market reserve or exclusivity.
Clause 27.6.
The agreement shall be declared null by Anatel in the event of any incurable and serious irregularity to
this Agreement.
Chapter XXVIII - Indemnity
Clause 28.1.
For purposes of calculation any indemnity due to Anatel by the Concessionaire, in the events expressly set forth in this Agreement, the following shall apply:
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I – end of contractual period – there shall be no indemnity, except if evidenced
that the non-payment shall give rise to the Federal Government’s unjust enrichment in view of reversal of assets not yet fully repaid, subject to the provision in Clause 23.3., less the amount of losses caused and fines applied, as well as, if
applicable, any financial obligations not met;
II – expropriation – subject to article 113 of Law No. 9,472 of
1997, the indemnity, which shall be paid on demand, shall correspond to the amount of assets reversing to the granting power, less depreciation, amount of losses caused and fines applied, as well as, if applicable, any financial obligations not met;
III – forfeiture – irrespective of application of fines and cure of damages arising from default pursuant to this
Agreement, the Concessionaire may only file for indemnity upon evidence of the Federal Government’s unjust enrichment in view of the reversal of assets not yet fully repaid or depreciated, less the amount of losses caused and fines applied, as
well as, if applicable, any financial obligations not met;
IV – amicable or judicial termination – there shall be no
indemnity, except if otherwise fixed in court decision; and
V – annulment – only upon evidence that the
Concessionaire has not contributed to the illegality, there shall be indemnity corresponding only to the effective amounts of assets reversing to the Federal Government, calculated at the annulment declaration date, provided that these assets have
not yet been fully repaid for service exploitation, less the amount of losses caused and fines applied, as well as, if applicable, any financial obligations not met.
Paragraph 1.
The temporary amount to be advanced by Anatel due to expropriation shall be calculated pursuant
to provision in the specific authoritative law.
Paragraph 2.
In the event of forfeiture due to the
Concessionaire’s proven negligence, this will also give rise to:
a) withholding of credits arising from the Agreement,
including the appropriation of revenues from payments made by service users;
b) responsibility for any losses caused to the
Federal Government and users;
c) application of fines pursuant to this Agreement and legislation in force; and
d) loss of surety bonds set forth in Clause 24.1.
Paragraph 3.
Except for expropriation, the indemnity applicable to other events of end of Agreement shall be
calculated pursuant to the provisions in this Chapter and carried out in installments based on the number of months in which the concession would be still in force, and the first installment shall mature after one (1) year from the end of the
Agreement.
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Paragraph 4.
Anatel may transfer to the service provider
succeeding the Concessionaire, with respect to the service exploitation, the encumbrance for payment of respective indemnities, assuming the payment obligation again, in the event the new service provider delays payments over ninety (90) days.
Chapter XXIX - Users’ Council
Clause 29.1.
The Concessionaire shall organize and keep Users’ Councils with an advisory role, pursuant to applicable regulation.
Chapter XXX - Environment and Environmental Control
Clause 30.1.
The Concessionaire shall adopt, at its own account and risk, all measures stated in the Brazilian legislation or regulation, or, in its absence, the best environmental practices, especially in relation to:
I – the usage of ground and underground;
II – the construction of towers, poles and other supporting structures to fix any electromagnetic radiation equipment;
III – the human exposure to electric, magnetic and electromagnetic fields, with the compliance with any limits established in Anatel’s regulation;
IV – the mitigated use of natural resources and energy; and
V – the respect to the historical and cultural heritage and to Indian communities.
Sole paragraph.
The Concessionaire shall submit to the applicable bodies, whenever required, reports on environmental impacts, as well as make efforts to achieve the respective license, pursuant to
applicable legislation.
Chapter XXXI - Intervention
Clause 31.1.
Intervention in the Concessionaire may be ordered by Anatel, at its discretion and in the public interest, by means of a specific act and motivated by its Steering Committee, pursuant
to Book III, Section V, Chapter II, Title II, of Law No. 9,472 of 1997, especially in the following situations:
I –
unreasonable service interruption, which shall be construed as interruption to service provision in other events than those set forth in this Agreement and without submitting any reasons deemed by Anatel as justifications;
II – recurrent inadequacies or deficiencies in the service provided, characterized by the failure to meet quality parameters set
forth in this Agreement and in regulation, even after having a time limit notified by Anatel to regularize the situation;
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III – bad management practices posing risk to the continuity of services, especially
any practice giving rise to financial imbalance;
IV – serious breaches;
V – noncompliance with universalization targets, which shall be construed as the unreasonable failure to meet the schedule of
universalization obligations stated in this Agreement;
VI – unreasonable refusal or delay in providing the
interconnection, which shall be construed as the refusal, delay or any hindering attitudes towards the negotiation or activation to its network, as requested by another service provider, subject to applicable regulation;
VII – breaches of the economic order, in such a way to prevent behaviors harmful to the free, broad and fair competition among
service providers; and
VIII – failure to provide accountability to Anatel or placing obstacles to inspection activities
which might presume the practice of any of the events set forth in the foregoing items.
Clause 31.2.
The intervention
act shall necessarily define the period, the reasons, the purposes and the limits, in addition to appoint the intervener.
Sole paragraph.
The intervention period and limits shall be consistent and proportional to the reasons which gave rise to such
act.
Clause 31.3.
The intervention shall be preceded by an administrative proceeding filed by Anatel, and the
Concessionaire shall be guaranteed the right to full defense.
Sole paragraph.
When it becomes indispensable, the
prompt intervention may be ordered by Anatel, based on an injunction, without the Concessionaire’s previous statement of position, and in this case the proceeding shall be immediately filed at the date it is ordered and concluded no longer than
one hundred eighty (180) days, during which the Concessionaire may exercise its right to full defense.
Clause 31.4.
The intervention order shall not affect the Concessionaire’s normal course of business or its normal operations, but shall cause the immediate removal of its management.
Clause 31.5.
The intervener’s role may be laid upon an officer belonging to Anatel’s staff, a specifically appointed
person, board of directors or company, and the Concessionaire shall bear the related compensation costs.
Paragraph 1.
Anatel may file an appeal against any acts carried out by the intervener.
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Paragraph 2.
The intervener shall account for and be held liable
for any acts he/she carries out.
Paragraph 3.
For any sale and disposal of the
Concessionaire’s assets, the intervener shall need Anatel’s prior approval.
Clause 31.6.
The intervention
shall not be ordered when, at Anatel’s judgment, it is deemed as unnecessary.
Sole paragraph.
The intervention
shall be deemed as unnecessary in the events set forth in paragraph 1 of Clause 27.4, as well as in those set forth in article 114, item IV, of Law No. 9,472 of 1997.
Chapter XXXII - Expropriations and Administrative Impositions
Clause
32.1.
For purposes of service implementation, provision or modernization, if any expropriation or administrative easement is required, the related encumbrances shall be the full responsibility of the Concessionaire, and Anatel shall request the
President of the Republic, through the Ministry of Communications, to issue a public interest order.
Chapter XXXIII - Arbitration
Clause 33.1.
Any possible conflicts arising in connection with the application and interpretation of the concession
rules shall be settled by Anatel, while exercising its role as a regulatory body, pursuant to articles 8 and 19 of Law No. 9,472 of 1997 and to its Bylaws, and the Concessionaire may resort to the arbitration procedure addressed in this Chapter
solely when in disagreement with Anatel’s decision related to the following issues:
I – breach of the
Concessionaire’s right to protect is economic situation, as set forth in Chapter XIII;
II – tariff reviews, as set
forth in Chapter XIII; and
III – indemnities due upon the end of this Agreement, including those with respect to reversed
assets.
Sole paragraph.
The submission of any issue to arbitration shall not exempt Anatel and the Concessionaire from
the obligation to fully comply with this Agreement or allow the interruption of concession-related activities.
Clause
33.2.
The arbitration process shall start upon the notice, forwarded from one party to the other, requiring the convening of an Arbitration Court, as set forth in this Chapter, and detailing the issue giving rise to the dispute.
Sole paragraph.
Anatel may refuse the convening of Arbitration Court if it reasonably evidences that the related dispute fails to
fall into the list of issues set forth in Clause 33.1.
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Clause 33.3.
The Arbitration Court shall be composed of five (5) members,
appointed as follows:
I – two (2) incumbent members and respective deputies appointed by Anatel’s Steering
Committee chosen from experts in the areas involved in the dispute, not belonging to its staff, and at least one member, which shall chair it, shall be specifically knowledgeable of telecommunications legal regulation;
II – two (2) incumbent members and respective deputies appointed by the Concessionaire, chosen from experts in the areas
involved in the dispute, not belonging to its staff, and at least one member shall be specifically knowledgeable of the telecommunications legal regulation; and
III – one (1) incumbent member and respective deputy appointed by the members referred to in the foregoing items.
Paragraph 1.
The Arbitration Court may be supported by technical experts if deemed convenient by the Court.
Paragraph 2.
The Arbitration Court shall be deemed as convened on the date when all arbitrators
accept their appointments and communicate both parts about their acceptance.
Paragraph 3.
The
Arbitration Court shall judge according to the applicable law and its awards shall have enforceable effects, irrespective of any judicial confirmation.
Clause 33.4.
If not refused by Anatel or having any challenge thereof being overcome, the Process addressed in this Chapter shall start by following the procedures below:
I – the parties shall have ten (10) days counted from receipt of notices addressed in the preamble to the foregoing Clause to
appoint the members of the Arbitration Court, which shall be immediately convened after all its members are accepted.
II
– in the event one of the parties is inactive or has resisted the convening of an Arbitration Court, the adversary party may use the option set forth in article 7 of Law No. 9,307 of September 23, 1996;
III – after the Arbitration Court is convened, a successive period of twenty five (25) days shall start for the parties to
submit their reasoning on the disputed issue, and in such opportunity the parties may submit appraisal and expert reports opinions, gather documents and information deemed as significant to support their positions;
IV – after submission of documentation, the Court will review the submitted reasoning and may, upon request by one of its members,
determine the preparation of appraisal and expert reports or opinions, request information or documents from the parties, as well as carry out diligent works and take measures
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deemed as necessary for the perfect finding of facts with respect to the disputed issue;
V – during the gathering of the elements referred to in the item above, the parties shall always be allowed to state their positions and enjoy the adversarial principle, subject to the principles of
informality, consensuality and celerity which shall guide the procedure;
VI – when the proceeding is declared as ended, a
common period of fifteen (15) days shall be granted for the parties to submit their final allegations;
VII – after
the period stated in the item above elapses, irrespective of the submission of final allegations, the Arbitration Court shall issue its award no longer than thirty (30) days;
VIII – the Arbitration Court’s award shall not be challenged, except for a request for reconsideration applicable solely in the
event the award was adopted with majority of one vote only; and
IX – the arbitration proceeding shall be deemed as
invalid only in the events stated in article 32 of Law No. 9,307 of 1996.
Sole paragraph.
Any expenses on the
arbitration proceeding, comprising, among others, costs on appraisal and expert reports, and opinions, as well as Court members’ fees, shall be assigned to the Concessionaire or Anatel, in conformity with the Arbitration Court’s award.
Chapter XXXIV - Settlement of Conflicts
Clause 34.1.
Any possible conflicts arising between the Concessionaire and other collective interest telecommunications service providers with respect to the interpretation and application of
regulation may be submitted to Anatel, while exercising its regulatory body role, pursuant to articles 8 and 19 of Law No. 9,472 of 1997, upon:
I – meeting to settle conflicts;
II – mediation proceeding; and
III – arbitration proceeding.
Sole paragraph.
The adoption of the instruments stated in this Clause shall not jeopardize the use of any manners of administrative settlement of conflicts between service providers, pursuant to
Anatel’s Bylaws.
Chapter XXXV - Applicable Legal System and Documents
Clause 35.1.
Without prejudice to other rules comprising the Brazilian legal system, this concession shall be ruled by Law
No. 9,472, of July 16, 1997, and applicable
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regulation arising therefrom, especially the jurisdiction of the Executive Branch, pursuant to article 18 of said Law, and in the event of any conflicts of law, the latter shall prevail.
Clause 35.2.
Upon the provision of services hereby granted, the national telecommunications policies and Anatel’s
regulations shall be followed, especially the documents listed below:
I – General Licensing Plan;
II – General Plan on Universal Service;
III – General Quality Targets Plan;
IV – General Competition Targets
Plan;
V – Telecommunications Services Regulation;
VI – Switched Fixed Telephony Services Regulation;
VII – General Interconnection Regulation;
VIII – Numbering Regulation
for the Switched Fixed Telephony Services;
IX – Numbering Resources Management Regulation;
X – Regulation for Compensation for the Usage of STFC Networks;
XI – Local Areas Regulation;
XII –Regulation for the Use of Services and Telecommunications Networks for Access to Internet Services;
XIII – Regulation for Access Code Portability;
XIV – Sanctions
Regulation;
XV – Account Segregation and Allocation Regulation;
XVI – Regulation for Industrial Exploitation of Dedicated Lines;
XVII – Tariffs Regulation;
XVIII – Regulation for Systemic Interruption in the Switched Fixed Telephony Services;
XIX – Regulation for Control over Reversible Assets;
XX – Regulation
for STFC Commercialization and Resale Offerings;
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XXI – Regulation for Provision of STFC with the Usage of Non-Geographic Access Code;
XXII – Regulation for Disclosure of Lists of Subscribers and Issue and Distribution of Mandatory and Free Telephone
Directory; and
XXIII – Regulation for Supply of Information for Disclosure of Lists of Subscribers Purposes.
Clause 35.3.
Upon interpretation of the rules and provisions stated in this Agreement the general hermeneutics rules and the rules
and principles stated in Law No. 9,472 of 1997, in addition to the documents referred to in item above, shall be taken into account.
Chapter XXXVI - Venue
Clause 36.1.
For settlement of any issues arising from this Agreement which may not be settled by means of the proceedings stated
in Chapter XXXIII – Arbitration, the parties hereto elect the Judiciary Section of the Federal Justice in Brasília – Federal District.
Chapter XXXVII - General Final Provisions
Clause 37.1.
This
Agreement herein executed shall come into effect upon publication of its excerpt in the Official Federal Gazette.
Clause
37.2.
This Agreement may be amended unilaterally by means of supervening judicial provision, by force of law or act by the Granting Power.
IN WITNESS WHEREOF, the Parties hereto execute this Agreement in three (3) counterparts of equal tenor in the presence of the undersigned witnesses
for all its legal purposes and effects.
Brasília, June 30, 2011.
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Anatel:
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The Concessionaire:
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/s/ Ronaldo Mota Sardenberg
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/s/ João de Deus Pinheiro de Macedo
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RONALDO MOTA SARDENBERG
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JOÃO DE DEUS PINHEIRO DE MACEDO
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President
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Executive Planning Officer
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/s/ João Batista de Rezende
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/s/ Paulo Todescan Lessa Mattos
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JOÃO BATISTA DE REZENDE
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PAULO TODESCAN LESSA MATTOS
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Board Member
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Regulatory Officer
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Witnesses:
|
|
|
|
|
|
|
|
|
|
/s/ Christian Charles Marlow
|
|
|
|
/s/ José Roberto Pereira Neder
|
|
CRISTIAN CHARLES MARLOW
|
|
|
|
JOSÉ ROBERTO PEREIRA NEDER
|
|
Identity Card (CI): 7054254128 SSP-RS
|
|
|
|
Identity Card (CI): 75124245 SSP-SP
|
|
Individual Taxpayer’s ID (CPF): 724.270.860-53
|
|
|
|
Individual Taxpayer’s ID (CPF):
148.812.503-63
|
54
Exhibit 10.5
ATTACHMENT No. 1 – QUALIFICATION OF REVERSIBLE ASSETS IN THE
PROVISION OF LOCAL SWITCHED FIXED TELEPHONY SERVICES
a) Switch and transmission infrastructure and equipment, including public use terminals;
b) External network infrastructure and equipment;
c) Energy and air-conditioning
infrastructure and equipment;
d) Infrastructure and equipment for User Information and Service Centers;
e) Infrastructure and equipment for operation supporting systems;
f) Infrastructure and equipment installed due to universalization obligations provided for in the General Plan on Universal Service, approved pursuant to article 18, item III, of Law No. 9,472 of
July 16, 1997; and
g) Others fundamental to the service provision.
55
Exhibit 10.5
ATTACHMENT 2 - GENERAL PLAN ON UNIVERSAL SERVICE
1. The universalization
targets are those established in the General Plan on Universal Service.
56
Exhibit 10.5
ATTACHMENT No. 3
BASIC LOCAL SERVICE PLAN
Brasil Telecom S.A.
Sector 18
1. General
1.1. The Basic Plan for Switched Fixed Telephony Services – Local mode - is governed by the regulation in force, the Acts mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the local mode set forth in applicable regulation, including those related to other
subscriber classes, are an integral part of this attachment as if they were included herein.
1.2. Local collect calls shall be charged based
on the same tariff criteria for calls charged at origin, excluding the time used for voicing warnings and acceptance of collect calls.
1.3.
The tariffs submitted herein are the maximum ones and net of taxes, except as provided in item 3.1.8.
2. Individual Access to the Switched
Fixed Telephony Service (STFC)
2.1. For access to the Switched Fixed Telephony Service, the Concessionaire may charge an Activation Fee,
for every one of the subscribers class, subject to the maximum limit of thirty-six reais and seventy-seven centavos (R$36.77), as defined in Act No. 6,777, of October 19, 2010.
2.2. For maintenance of the usage right, if applicable, the Concessionaries are authorized to charge a monthly subscription fee, according to the table below, as defined in Act No. 6,777 of
October 19, 2010.
|
|
|
|
|
Subscriber Class
|
|
R$
|
|
Residential
|
|
Twenty-nine reais and twenty-six centavos (R$29.26)
|
|
Non-residential
|
|
Forty-one reais and eighty centavos (R$41.80)
|
|
Trunking
|
|
Forty-one reais and eighty centavos (R$41.80)
|
|
Special
|
|
Seventeen reais and fifty-five centavos (R$17.55)
|
57
2.2.1. The subscription to the Local Switched Fixed Telephony Service includes two hundred (200) free
minutes for the residential class, pursuant to STFC Tariff Regulation provided in the public system.
2.2.2. The subscription to the Local
Switched Fixed Telephone Service includes one hundred fifty (150) free minutes for the non-residential and trunking classes, pursuant to STFC Tariff Regulation provided in the public system.
2.3. The change of address of an activated subscriber may be charged, and its value (TME) shall be limited to the Activation Fee of the respective
classes, as defined in the STFC Tariff Regulation provided in the public system.
3. Use of the Switched Fixed Telephony Service in the
Local Mode
3.1. Pursuant to applicable regulation, for invoiceable calls comprised in the Local Switched Fixed Telephony Service:
3.1.1. The use of the Local Switched Fixed Telephony Service, by subscribers of the residential, non-residential and trunking classes, shall
be charged as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be
thirty (30) seconds; or
b) per call answered, which is charged based on the application of a value per call answered (VCA), irrespective
of the call duration.
|
|
|
|
|
|
|
Days
|
|
Period
|
|
Measure system
|
|
From Mondays to Fridays from 6am to 12am
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
From Mondays to Fridays from 12am to 6am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Saturdays from 6am to 2pm
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
Saturdays from 12am to 6am and from 2pm to 12am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Sundays and Brazilian official holidays from 12am to 12am
|
|
Simple
|
|
Call
|
3.1.2. The use of the Local Switched Fixed Telephony Service by subscribers of the Special class (AICE) shall be charged
as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty
(30) seconds, without time modulation; or
b) per call completion tariff, irrespective of the time or duration of the call.
58
3.1.3. For tariffs for usage time, the maximum value for the tariff minute (MIN) is seven thousand eight
hundred thirty-three hundredths of thousandths of reais (R$0.07833), pursuant to Act No. 6,777 of October 19, 2010.
3.1.4. For call
tariff, the maximum value for the answered call (VCA) is calculated based on the maximum value of usage minute (MIN), pursuant to the STFC Tariff Regulation provided in the public system.
3.1.5. The maximum value for VCA, on the date this Agreement is in force, is fifteen thousand six hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of
October 19, 2010.
3.1.6. The maximum value for the Completion Tariff, on the date this Agreement is in force, is fifteen thousand six
hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.7. For local
calls originated from collective usage accesses and designed for fixed terminals, the measured usage time method will be adopted based on the value of the tariff unit (UTP), pursuant to the STFC Tariff Regulation provided in the Public system, with
the first unit being applied upon answering the call and the subsequent units at every one hundred twenty (120) seconds.
3.1.8. The
value of one UTP (VTP) is one thousand two hundred thirty tenths of thousandths of reais (R$0.1230), including taxes, as defined in Act No. 6,777 of October 19, 2010.
3.2. Calls involving other telecommunications services
3.2.1. The tariff criteria and procedures
involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
3.2.1.1. The tariff unit is the tenth of minute (six
seconds).
3.2.1.2. The minimum tariff time is thirty (30) seconds.
3.2.1.3. The maximum communication minute values involving the PMS (VC-1), per minute, for the normal tariff time and for the reduced tariff time, are shown in the table below, pursuant to Act
No. 971 of February 9, 2010.
|
|
|
|
|
|
|
Destination PMS Provider
|
|
Normal tariff
|
|
Reduced Tariff
|
|
Americel S.A.
|
|
0.53844
|
|
0.37690
|
|
TIM Celular S.A.
|
|
0.53477
|
|
0.37433
|
|
Vivo S.A.
|
|
0.52011
|
|
0.36407
|
|
14 Brasil Telecom S.A.
|
|
0.53725
|
|
0.37607
|
3.2.1.4. The time of reduced tariff for calls addressed to PMS shall be Mondays to Saturdays from 12am to 7am and from
9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
59
3.2.2. The tariff criteria and procedures involving the Specialized Mobile Service (SMS) are those defined
in applicable regulation.
3.2.2.1. The tariff unit is the tenth of minute (six seconds).
3.2.2.2. The minimum tariff time is thirty (30) seconds.
3.2.2.3. The maximum communication minute value involving the SMS (VC-1), per minute, is forty-seven thousand three hundred three hundredths of thousandths reais (R$0.47303) for the normal tariff
time, and thirty three thousand one hundred hundredths of thousandths of reais (R$0.33112) for reduced tariff time, as defined in Act No. 54,687 of December 12, 2005.
3.2.2.4. The reduced tariff time for calls addressed to the SMS shall be Mondays to Mondays to Saturdays from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian official holidays from 12am to
12am, pursuant to applicable regulation.
3.2.3. For calls originated in TUP (telephone for public usage) and designed to other collective
interest services, the respective communication values for counting of UTPs shall be adopted.
60
Exhibit 10.5
ATTACHMENT No. 3
BASIC LOCAL SERVICE PLAN
Brasil Telecom S.A.
Sector 19
1. General
1.1. The Basic Plan for Switched Fixed Telephony Services – Local mode - is governed by the regulation in force, the Acts mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the local mode set forth in applicable regulation, including those related to other
subscriber classes, are an integral part of this attachment as if they were included herein.
1.2. Local collect calls shall be charged based
on the same tariff criteria for calls charged at origin, excluding the time used for voicing warnings and acceptance of collect calls.
1.3.
The tariffs submitted herein are the maximum ones and net of taxes, except as provided in item 3.1.8.
2. Individual Access to the Switched
Fixed Telephony Service (STFC)
2.1. For access to the Switched Fixed Telephony Service, the Concessionaire may charge an Activation Fee,
for every one of the subscribers class, subject to the maximum limit of seven reais and twenty-two centavos (R$7.22), as defined in Act No. 6,777, of October 19, 2010.
2.2. For maintenance of the usage right, if applicable, the Concessionaries are authorized to charge a monthly subscription fee, according to the table below, as defined in Act No. 6,777 of
October 19, 2010.
|
|
|
|
|
Subscriber Class
|
|
R$
|
|
Residential
|
|
Twenty-nine reais and thirty-one centavos (R$29.31)
|
|
Non-residential
|
|
Forty-three reais and seventy-eight centavos (R$43.78)
|
|
Trunking
|
|
Forty-three reais and seventy-eight centavos (R$43.78)
|
|
Special
|
|
Seventeen reais and fifty-eight centavos (R$17.58)
|
2.2.1. The subscription to the Local Switched Fixed Telephony Service includes two hundred (200) free minutes for
the residential class, pursuant to STFC Tariff Regulation provided in the public system.
61
2.2.2. The subscription to the Local Switched Fixed Telephone Service includes one hundred fifty
(150) free minutes for the non-residential and trunking classes, pursuant to STFC Tariff Regulation provided in the public system.
2.3.
The change of address of an activated subscriber may be charged, and its value (TME) shall be limited to the Activation Fee of the respective classes, as defined in the STFC Tariff Regulation provided in the public system.
3. Use of the Switched Fixed Telephony Service in the Local Mode
3.1. Pursuant to applicable regulation, for invoiceable calls comprised in the Local Switched Fixed Telephony Service:
3.1.1. The use of the Local Switched Fixed Telephony Service, by subscribers of the residential, non-residential and trunking classes, shall be charged as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty (30) seconds; or
b) per call answered, which is charged based on the application of a value per call answered (VCA), irrespective of the call duration.
|
|
|
|
|
|
|
Days
|
|
Period
|
|
Measure system
|
|
From Mondays to Fridays from 6am to 12am
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
From Mondays to Fridays from 12am to 6am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Saturdays from 6am to 2pm
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
Saturdays from 12am to 6am and from 2pm to 12am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Sundays and Brazilian official holidays from 12am to 12am
|
|
Simple
|
|
Call
|
3.1.2. The use of the Local Switched Fixed Telephony Service by subscribers of the Special class (AICE) shall be charged
as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty
(30) seconds, without time modulation; or
b) per call completion tariff, irrespective of the time or duration of the call.
3.1.3. For tariffs for usage time, the maximum value for the tariff minute (MIN) is seven thousand eight hundred thirty-three hundredths of thousandths
of reais (R$0.07833), pursuant to Act No. 6,777 of October 19, 2010.
62
3.1.4. For call tariff, the maximum value for the answered call (VCA) is calculated based on the maximum
value of usage minute (MIN), pursuant to the STFC Tariff Regulation provided in the public system.
3.1.5. The maximum value for VCA, on the
date this Agreement is in force, is fifteen thousand six hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.6. The maximum value for the Completion Tariff, on the date this Agreement is in force, is fifteen thousand six hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act
No. 6,777 of October 19, 2010.
3.1.7. For local calls originated from collective usage accesses and designed for fixed terminals,
the measured usage time method will be adopted based on the value of the tariff unit (UTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the subsequent units at
every one hundred twenty (120) seconds.
3.1.8. The value of one UTP (VTP) is one thousand two hundred thirty tenths of thousandths of
reais (R$0.1230), including taxes, as defined in Act No. 6,777 of October 19, 2010.
3.2. Calls involving other telecommunications
services
3.2.1. The tariff criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
3.2.1.1. The tariff unit is the tenth of minute (six seconds).
3.2.1.2. The minimum tariff time is thirty (30) seconds.
3.2.1.3. The maximum communication
minute values involving the PMS (VC-1), per minute, for the normal tariff time and for the reduced tariff time, are shown in the table below, pursuant to Act No. 971 of February 9, 2010.
|
|
|
|
|
|
|
Destination PMS Provider
|
|
Normal tariff
|
|
Reduced Tariff
|
|
Claro S.A.
|
|
0.53717
|
|
0.37601
|
|
Sercomtel Celular S.A.
|
|
0.53614
|
|
0.37529
|
|
TIM Celular S.A.
|
|
0.53614
|
|
0.37529
|
|
Vivo S.A.
|
|
0.52136
|
|
0.36495
|
|
14 Brasil Telecom S.A.
|
|
0.53848
|
|
0.37693
|
3.2.1.4. The reduced tariff time for calls addressed to the SMS shall be Mondays to Mondays to Saturdays from 12am to 7am
and from 9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.2. The tariff
criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
63
3.2.2.1. The tariff unit is the tenth of minute (six seconds).
3.2.2.2. The minimum tariff time is thirty (30) seconds.
3.2.2.3. The maximum communication minute value involving the SMS (VC-1), per minute, is forty-seven thousand three hundred three hundredths of thousandths reais (R$0.47303) for the normal tariff
time, and thirty three thousand one hundred hundredths of thousandths of reais (R$0.33112) for reduced tariff time, as defined in Act No. 54,687 of December 12, 2005.
3.2.2.4. The reduced tariff time for calls addressed to the SMS shall be Mondays to Mondays to Saturdays from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian official holidays from 12am to
12am, pursuant to applicable regulation.
3.2.3. For calls originated in TUP (telephone for public usage) and designed to other collective
interest services, the respective communication values for counting of UTPs shall be adopted.
64
Exhibit 10.5
ATTACHMENT No. 3
BASIC LOCAL SERVICE PLAN
Brasil Telecom S.A.
Sector 21
1. General
1.1. The Basic Plan for Switched Fixed Telephony Services – Local mode - is governed by the regulation in force, the Acts mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the local mode set forth in applicable regulation, including those related to other
subscriber classes, are an integral part of this attachment as if they were included herein.
1.2. Local collect calls shall be charged based
on the same tariff criteria for calls charged at origin, excluding the time used for voicing warnings and acceptance of collect calls.
1.3.
The tariffs submitted herein are the maximum ones and net of taxes, except as provided in item 3.1.8.
2. Individual Access to the Switched
Fixed Telephony Service (STFC)
2.1. For access to the Switched Fixed Telephony Service, the Concessionaire may charge an Activation Fee,
for every one of the subscribers class, subject to the maximum limit of twenty-seven reais and thirty-nine centavos (R$27.39), as defined in Act No. 6,777, of October 19, 2010.
2.2. For maintenance of the usage right, if applicable, the Concessionaries are authorized to charge a monthly subscription fee, according to the table below, as defined in Act No. 6,777 of
October 19, 2010.
|
|
|
|
|
Subscriber Class
|
|
R$
|
|
Residential
|
|
Twenty-nine reais and twenty-five centavos (R$29.25)
|
|
Non-residential
|
|
Forty-four reais and thirty-nine centavos (R$44.39)
|
|
Trunking
|
|
Forty-four reais and thirty-nine centavos (R$44.39)
|
|
Special
|
|
Seventeen reais and fifty-five centavos (R$17.55)
|
2.2.1. The subscription to the Local Switched Fixed Telephony Service includes two hundred (200) free minutes for
the residential class, pursuant to STFC Tariff Regulation provided in the public system.
65
2.2.2. The subscription to the Local Switched Fixed Telephone Service includes one hundred fifty
(150) free minutes for the non-residential and trunking classes, pursuant to STFC Tariff Regulation provided in the public system.
2.3.
The change of address of an activated subscriber may be charged, and its value (TME) shall be limited to the Activation Fee of the respective classes, as defined in the STFC Tariff Regulation provided in the public system.
3. Use of the Switched Fixed Telephony Service in the Local Mode
3.1. Pursuant to applicable regulation, for invoiceable calls comprised in the Local Switched Fixed Telephony Service:
3.1.1. The use of the Local Switched Fixed Telephony Service, by subscribers of the residential, non-residential and trunking classes, shall be charged as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty (30) seconds; or
b) per call answered, which is charged based on the application of a value per call answered (VCA), irrespective of the call duration.
|
|
|
|
|
|
|
Days
|
|
Period
|
|
Measure system
|
|
From Mondays to Fridays from 6am to 12am
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
From Mondays to Fridays from 12am to 6am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Saturdays from 6am to 2pm
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
Saturdays from 12am to 6am and from 2pm to 12am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Sundays and Brazilian official holidays from 12am to 12am
|
|
Simple
|
|
Call
|
3.1.2. The use of the Local Switched Fixed Telephony Service by subscribers of the Special class (AICE) shall be charged
as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty
(30) seconds, without time modulation; or
b) per call completion tariff, irrespective of the time or duration of the call.
3.1.3. For tariffs for usage time, the maximum value for the tariff minute (MIN) is seven thousand eight hundred thirty-three hundredths of thousandths
of reais (R$0.07833), pursuant to Act No. 6,777 of October 19, 2010.
3.1.4. For call tariff, the maximum value for the answered
call (VCA) is calculated based on the maximum value of usage minute (MIN), pursuant to the STFC Tariff Regulation provided in the public system.
66
3.1.5. The maximum value for VCA, on the date this Agreement is in force, is fifteen thousand six hundred
sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.6. The maximum value
for the Completion Tariff, on the date this Agreement is in force, is fifteen thousand six hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.7. For local calls originated from collective usage accesses and designed for fixed terminals, the measured usage time method will be adopted based
on the value of the tariff unit (UTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the subsequent units at every one hundred twenty (120) seconds.
3.1.8. The value of one UTP (VTP) is one thousand two hundred thirty tenths of thousandths of reais (R$0.1230), including taxes, as defined
in Act No. 6,777 of October 19, 2010.
3.2. Calls involving other telecommunications services
3.2.1. The tariff criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
3.2.1.1. The tariff unit is the tenth of minute (six seconds).
3.2.1.2. The minimum tariff time is thirty (30) seconds.
3.2.1.3. The maximum communication
minute values involving the PMS (VC-1), per minute, for the normal tariff time and for the reduced tariff time, are shown in the table below, pursuant to Acts No. 4,290 of July 21, 2008 and 971 of February 9, 2010.
|
|
|
|
|
|
|
Destination PMS Provider
|
|
Normal tariff
|
|
Reduced Tariff
|
|
Americel S.A.
|
|
0.55276
|
|
0.38693
|
|
CTBC Celular S.A.
|
|
0.58476
|
|
0.40933
|
|
TIM Celular S.A.
|
|
0.54494
|
|
0.38145
|
|
Vivo S.A.
|
|
0.56133
|
|
0.39293
|
|
14 Brasil Telecom S.A.
|
|
0.54494
|
|
0.38145
|
3.2.1.4. The reduced tariff time for calls addressed to the SMS shall be Mondays to Mondays to Saturdays from 12am to 7am
and from 9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.2. The tariff
criteria and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
3.2.2.1. The tariff unit
is the tenth of minute (six seconds).
3.2.2.2. The minimum tariff time is thirty (30) seconds.
67
3 2.2.3. The maximum communication minute value involving the SMS (VC-3), per minute, is forty-seven
thousand three hundred three hundredths of thousandths reais (R$0.47303) for the normal tariff time, and thirty-three thousand one hundred twelve hundredths of thousandths of reais (R$0.33112) for reduced tariff time, as defined in Act
No. 54,687 of December 12, 2005.
3.2.2.4. The reduced tariff time for calls addressed to the SMS shall be Mondays to Mondays to
Saturdays from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.3. For calls originated in TUP (telephone for public usage) and designed to other collective interest services, the respective communication values for counting of UTPs shall be adopted.
68
Exhibit 10.5
ATTACHMENT No. 3
BASIC LOCAL SERVICE PLAN
Brasil Telecom S.A.
Sector 23
1. General
1.1. The Basic Plan for Switched Fixed Telephony Services – Local mode - is governed by the regulation in force, the Acts mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the local mode set forth in applicable regulation, including those related to other
subscriber classes, are an integral part of this attachment as if they were included herein.
1.2. Local collect calls shall be charged based
on the same tariff criteria for calls charged at origin, excluding the time used for voicing warnings and acceptance of collect calls.
1.3.
The tariffs submitted herein are the maximum ones and net of taxes, except as provided in item 3.1.8.
2. Individual Access to the Switched
Fixed Telephony Service (STFC)
2.1. For access to the Switched Fixed Telephony Service, the Concessionaire may charge an Activation Fee,
for every one of the subscribers class, subject to the maximum limit of twenty-seven reais and twenty centavos (R$27.20), as defined in Act No. 6,777, of October 19, 2010.
2.2. For maintenance of the usage right, if applicable, the Concessionaries are authorized to charge a monthly subscription fee, according to the table below, as defined in Act No. 6,777 of
October 19, 2010.
|
|
|
|
|
Subscriber Class
|
|
R$
|
|
Residential
|
|
Twenty-nine reais and nine centavos (R$29.09)
|
|
Non-residential
|
|
Forty-six reais and thirty-nine centavos (R$46.39)
|
|
Trunking
|
|
Forty-six reais and thirty-nine centavos (R$46.39)
|
|
Special
|
|
Seventeen reais and forty-five centavos (R$17.45)
|
2.2.2. The subscription to the Local Switched Fixed Telephone Service includes one hundred fifty (150) free minutes
for the non-residential and trunking classes, pursuant to STFC Tariff Regulation provided in the public system.
69
2.3. The change of address of an activated subscriber may be charged, and its value (TME) shall be limited
to the Activation Fee of the respective classes, as defined in the STFC Tariff Regulation provided in the public system.
3. Use of the
Switched Fixed Telephony Service in the Local Mode
3.1. Pursuant to applicable regulation, for invoiceable calls comprised in the Local
Switched Fixed Telephony Service:
3.1.1. The use of the Local Switched Fixed Telephony Service, by subscribers of the residential,
non-residential and trunking classes, shall be charged as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six
seconds) and the minimum tariff time shall be thirty (30) seconds; or
b) per call answered, which is charged based on the application of
a value per call answered (VCA), irrespective of the call duration.
|
|
|
|
|
|
|
Days
|
|
Period
|
|
Measure system
|
|
From Mondays to Fridays from 6am to 12am
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
From Mondays to Fridays from 12am to 6am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Saturdays from 6am to 2pm
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
Saturdays from 12am to 6am and from 2pm to 12am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Sundays and Brazilian official holidays from 12am to 12am
|
|
Simple
|
|
Call
|
3.1.2. The use of the Local Switched Fixed Telephony Service by subscribers of the Special class (AICE) shall be charged
as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty
(30) seconds, without time modulation; or
b) per call completion tariff, irrespective of the time or duration of the call.
3.1.3. For tariffs for usage time, the maximum value for the tariff minute (MIN) is seven thousand eight hundred thirty-three hundredths of thousandths
of reais (R$0.07833), pursuant to Act No. 6,777 of October 19, 2010.
3.1.4. For call tariff, the maximum value for the answered
call (VCA) is calculated based on the maximum value of usage minute (MIN), pursuant to the STFC Tariff Regulation provided in the public system.
3.1.5. The maximum value for VCA, on the date this Agreement is in force, is fifteen thousand six hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of
October 19, 2010.
70
3.1.6. The maximum value for the Completion Tariff, on the date this Agreement is in force, is fifteen
thousand six hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.7. For local calls originated from collective usage accesses and designed for fixed terminals, the measured usage time method will be adopted based
on the value of the tariff unit (UTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the subsequent units at every one hundred twenty (120) seconds.
3.1.8. The value of one UTP (VTP) is one thousand two hundred thirty tenths of thousandths of reais (R$0.1230), including taxes, as defined
in Act No. 6,777 of October 19, 2010.
3.2. Calls involving other telecommunications services
3.2.1. The tariff criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
3.2.1.1. The tariff unit is the tenth of minute (six seconds).
3.2.1.2. The minimum tariff time is thirty (30) seconds.
3.2.1.3. The maximum communication
minute values involving the PMS (VC-1), per minute, for the normal tariff time and for the reduced tariff time, are shown in the table below, pursuant to Act No. 971 of February 9, 2010.
|
|
|
|
|
|
|
Destination PMS Provider
|
|
Normal tariff
|
|
Reduced Tariff
|
|
Americel S.A.
|
|
0.55476
|
|
0.38833
|
|
TIM Celular S.A.
|
|
0.54681
|
|
0.38276
|
|
Vivo S.A.
|
|
0.56133
|
|
0.39293
|
|
14 Brasil Telecom S.A.
|
|
0.54681
|
|
0.38276
|
3.2.1.4. The time of reduced tariff for calls addressed to PMS shall be Mondays to Saturdays from 12am to 7am and from
9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.2. The tariff criteria
and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
3.2.2.1. The tariff unit is the
tenth of minute (six seconds).
3.2.2.2. The minimum tariff time is thirty (30) seconds.
3.2.2.3. The maximum communication minute value involving the SMS (VC-1), per minute, is forty-seven thousand three hundred three hundredths of
thousandths reais (R$0.47303) for the normal tariff time, and thirty three thousand one hundred hundredths of thousandths of reais (R$0.33112) for reduced tariff time, as defined in Act No. 54,687 of December 12, 2005.
71
3.2.2.4. The reduced tariff time for calls addressed to the SMS shall be Mondays to Mondays to Saturdays
from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.3. For calls originated in TUP (telephone for public usage) and designed to other collective interest services, the respective communication values
for counting of UTPs shall be adopted.
72
Exhibit 10.5
ATTACHMENT No. 3
BASIC LOCAL SERVICE PLAN
Brasil Telecom S.A.
Sector 24
1. General
1.1. The Basic Plan for Switched Fixed Telephony Services – Local mode - is governed by regulation in force, the Acts mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the local mode set forth in the regulation, including those related to other subscriber classes, are
an integral part of this attachment as if they were included herein.
1.2. Local collect calls shall be charged based on the same tariff
criteria for calls charged at origin, excluding the time used for voicing warnings and acceptance of collect calls.
1.3. The tariffs
submitted herein are the maximum ones and net of taxes, except as provided in item 3.1.8.
2. Individual Access to the Switched Fixed
Telephony Service (STFC)
2.1. For access to the Switched Fixed Telephony Service, the Concessionaire may charge an Activation Fee, for every
one of the subscribers class, subject to the maximum limit of nineteen reais and eighty-one centavos (R$19.81), as defined in Act No. 6,777, of October 19, 2010.
2.2. For maintenance of the usage right, if applicable, the Concessionaries are authorized to charge a monthly subscription fee, according to the table below, as defined in Act No. 6,777 of
October 19, 2010.
|
|
|
|
|
Subscriber Class
|
|
R$
|
|
Residential
|
|
Twenty-nine reais and twenty-seven centavos (R$29.27)
|
|
Non-residential
|
|
Forty-five reais and eighty-six centavos (R$45.86)
|
|
Trunking
|
|
Forty-five reais and eighty-six centavos (R$45.86)
|
|
Special
|
|
Seventeen reais and fifty-six centavos (R$17.56)
|
2.2.1. The subscription to the Local Switched Fixed Telephony Service includes two hundred (200) free minutes for
the residential class, pursuant to STFC Tariff Regulation provided in the public system.
73
2.2.2. The subscription to the Local Switched Fixed Telephone Service includes one hundred fifty
(150) free minutes for the non-residential and trunking classes, pursuant to STFC Tariff Regulation provided in the public system.
2.3.
The change of address of an activated subscriber may be charged, and its value (TME) shall be limited to the Activation Fee of the respective classes, as defined in the STFC Tariff Regulation provided in the public system.
3. Use of the Switched Fixed Telephony Service in the Local Mode
3.1. Pursuant to applicable regulation, for invoiceable calls comprised in the Local Switched Fixed Telephony Service:
3.1.1. The use of the Local Switched Fixed Telephony Service, by subscribers of the residential, non-residential and trunking classes, shall be charged as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty (30) seconds; or
b) per call answered, which is charged based on the application of a value per call answered (VCA), irrespective of the call duration.
|
|
|
|
|
|
|
Days
|
|
Period
|
|
Measure system
|
|
From Mondays to Fridays from 6am to 12am
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
From Mondays to Fridays from 12am to 6am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Saturdays from 6am to 2pm
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
Saturdays from 12am to 6am and from 2pm to 12am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Sundays and Brazilian official holidays from 12am to 12am
|
|
Simple
|
|
Call
|
3.1.2. The use of the Local Switched Fixed Telephony Service by subscribers of the Special class (AICE) shall be charged
as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty
(30) seconds, without time modulation; or
b) per call completion tariff, irrespective of the time or duration of the call.
3.1.3. For tariffs for usage time, the maximum value for the tariff minute (MIN) is seven thousand eight hundred thirty-three hundredths of thousandths
of reais (R$0.07833), pursuant to Act No. 6,777 of October 19, 2010.
3.1.4. For call tariff, the maximum value for the answered
call (VCA) is calculated based on the maximum value of usage minute (MIN), pursuant to the STFC Tariff Regulation provided in the public system.
74
3.1.5. The maximum value for VCA, on the date this Agreement is in force, is fifteen thousand six hundred
sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.6. The maximum value
for the Completion Tariff, on the date this Agreement is in force, is fifteen thousand six hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.7. For local calls originated from collective usage accesses and designed for fixed terminals, the measured usage time method will be adopted based
on the value of the tariff unit (UTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the subsequent units at every one hundred twenty (120) seconds.
3.1.8. The value of one UTP (VTP) is one thousand two hundred thirty tenths of thousandths of reais (R$0.1230), including taxes, as defined
in Act No. 6,777 of October 19, 2010.
3.2. Calls involving other telecommunications services
3.2.1. The tariff criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
3.2.1.1. The tariff unit is the tenth of minute (six seconds).
3.2.1.2. The minimum tariff time is thirty (30) seconds.
3.2.1.3. The maximum communication
minute values involving the PMS (VC-1), per minute, for the normal tariff time and for the reduced tariff time, are shown in the table below, pursuant to Acts No. 4,290 of July 21, 2008 and 971 of February 9, 2010.
|
|
|
|
|
|
|
Destination PMS Provider
|
|
Normal tariff
|
|
Reduced Tariff
|
|
Americel S.A.
|
|
0.54692
|
|
0.38284
|
|
CTBC Celular S.A.
|
|
0.55591
|
|
0.38913
|
|
TIM Celular S.A.
|
|
0.53910
|
|
0.37737
|
|
Vivo S.A.
|
|
0.55798
|
|
0.39058
|
|
14 Brasil Telecom S.A.
|
|
0.53910
|
|
0.37737
|
3.2.1.4. The time of reduced tariff for calls addressed to PMS shall be Mondays to Saturdays from 12am to 7am and from
9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.2. The tariff criteria
and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
3.2.2.1. The tariff unit is the
tenth of minute (six seconds).
3.2.2.2. The minimum tariff time is thirty (30) seconds.
75
3.2.2.3. The maximum communication minute value involving the SMS (VC-1), per minute, is forty-seven
thousand three hundred three hundredths of thousandths reais (R$0.47303) for the normal tariff time, and thirty three thousand one hundred hundredths of thousandths of reais (R$0.33112) for reduced tariff time, as defined in Act No. 54,687 of
December 12, 2005.
3.2.2.4. The reduced tariff time for calls addressed to the SMS shall be Mondays to Mondays to Saturdays from 12am to
7am and from 9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.3. For
calls originated in TUP (telephone for public usage) and designed to other collective interest services, the respective communication values for counting of UTPs shall be adopted.
76
Exhibit 10.5
ATTACHMENT No. 3
BASIC LOCAL SERVICE PLAN
Brasil Telecom S.A.
Sector 26
1. General
1.1. The Basic Plan for Switched Fixed Telephony Services – Local mode - is governed by regulation in force, the Acts mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the local mode set forth in applicable regulation, including those related to other subscriber
classes, are an integral part of this attachment as if they were included herein.
1.2. Local collect calls shall be charged based on the same
tariff criteria for calls charged at origin, excluding the time used for voicing warnings and acceptance of collect calls.
1.3. The tariffs
submitted herein are the maximum ones and net of taxes, except as provided in item 3.1.8.
2. Individual Access to the Switched Fixed
Telephony Service (STFC)
2.1. For access to the Switched Fixed Telephony Service, the Concessionaire may charge an Activation Fee, for
every one of the subscribers class, subject to the maximum limit of thirteen reais and twenty-two centavos (R$13.22), as defined in Act No. 6,777, of October 19, 2010.
2.2. For maintenance of the usage right, if applicable, the Concessionaries are authorized to charge a monthly subscription fee, according to the table below, as defined in Act No. 6,777 of
October 19, 2010.
|
|
|
|
|
Subscriber Class
|
|
R$
|
|
Residential
|
|
Twenty-nine reais and thirty-one centavos (R$29.31)
|
|
Non-residential
|
|
Forty-five reais and eighty-six centavos (R$45.86)
|
|
Trunking
|
|
Forty-five reais and eighty-six centavos (R$45.86)
|
|
Special
|
|
Seventeen reais and fifty-eight centavos (R$17.58)
|
2.2.1. The subscription to the Local Switched Fixed Telephony Service includes two hundred (200) free minutes for
the residential class, pursuant to STFC Tariff Regulation provided in the public system.
77
2.2.2. The subscription to the Local Switched Fixed Telephone Service includes one hundred fifty
(150) free minutes for the non-residential and trunking classes, pursuant to STFC Tariff Regulation provided in the public system.
2.3.
The change of address of an activated subscriber may be charged, and its value (TME) shall be limited to the Activation Fee of the respective classes, as defined in the STFC Tariff Regulation provided in the public system.
3. Use of the Switched Fixed Telephony Service in the Local Mode
3.1. Pursuant to applicable regulation, for invoiceable calls comprised in the Local Switched Fixed Telephony Service:
3.1.1. The use of the Local Switched Fixed Telephony Service, by subscribers of the residential, non-residential and trunking classes, shall be charged as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty (30) seconds; or
b) per call answered, which is charged based on the application of a value per call answered (VCA), irrespective of the call duration.
|
|
|
|
|
|
|
Days
|
|
Period
|
|
Measure system
|
|
From Mondays to Fridays from 6am to 12am
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
From Mondays to Fridays from 12am to 6am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Saturdays from 6am to 2pm
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
Saturdays from 12am to 6am and from 2pm to 12am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Sundays and Brazilian official holidays from 12am to 12am
|
|
Simple
|
|
Call
|
3.1.2. The use of the Local Switched Fixed Telephony Service by subscribers of the Special class (AICE) shall be charged
as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty
(30) seconds, without time modulation; or
b) per call completion tariff, irrespective of the time or duration of the call.
3.1.3. For tariffs for usage time, the maximum value for the tariff minute (MIN) is seven thousand eight hundred thirty-three hundredths of thousandths
of reais (R$0.07833), pursuant to Act No. 6,777 of October 19, 2010.
3.1.4. For call tariff, the maximum value for the answered
call (VCA) is calculated based on the maximum value of usage minute (MIN), pursuant to the STFC Tariff Regulation provided in the public system.
78
3.1.5. The maximum value for VCA, on the date this Agreement is in force, is fifteen thousand six hundred
sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.6. The maximum value
for the Completion Tariff, on the date this Agreement is in force, is fifteen thousand six hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.7. For local calls originated from collective usage accesses and designed for fixed terminals, the measured usage time method will be adopted based
on the value of the tariff unit (UTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the subsequent units at every one hundred twenty (120) seconds.
3.1.8. The value of one UTP (VTP) is one thousand two hundred thirty tenths of thousandths of reais (R$0.1230), including taxes, as defined
in Act No. 6,777 of October 19, 2010.
3.2. Calls involving other telecommunications services
3.2.1. The tariff criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
3.2.1.1. The tariff unit is the tenth of minute (six seconds).
3.2.1.2. The minimum tariff time is thirty (30) seconds.
3.2.1.3. The maximum communication
minute values involving the PMS (VC-1), per minute, for the normal tariff time and for the reduced tariff time, are shown in the table below, pursuant to Act No. 971 of February 9, 2010.
|
|
|
|
|
|
|
Destination PMS Provider
|
|
Normal tariff
|
|
Reduced Tariff
|
|
Americel S.A.
|
|
0.55476
|
|
0.38833
|
|
TIM Celular S.A.
|
|
0.54681
|
|
0.38276
|
|
Vivo S.A.
|
|
0.56133
|
|
0.39293
|
|
14 Brasil Telecom S.A.
|
|
0.54681
|
|
0.38276
|
3.2.1.4. The time of reduced tariff for calls addressed to PMS shall be Mondays to Saturdays from 12am to 7am and from
9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.2. The tariff criteria
and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
3.2.2.1. The tariff unit is the
tenth of minute (six seconds).
3.2.2.2. The minimum tariff time is thirty (30) seconds.
79
3.2.2.3. The maximum communication minute value involving the SMS (VC-1), per minute, is forty-seven
thousand three hundred three hundredths of thousandths reais (R$0.47303) for the normal tariff time, and thirty three thousand one hundred hundredths of thousandths of reais (R$0.33112) for reduced tariff time, as defined in Act No. 54,687 of
December 12, 2005.
3.2.2.4. The reduced tariff time for calls addressed to the SMS shall be Mondays to Mondays to Saturdays from 12am to
7am and from 9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.3. For
calls originated in TUP (telephone for public usage) and designed to other collective interest services, the respective communication values for counting of UTPs shall be adopted.
80
Exhibit 10.5
ATTACHMENT No. 3
BASIC LOCAL SERVICE PLAN
Brasil Telecom S.A.
Sector 27
1. General
1.1. The Basic Plan for Switched Fixed Telephony Services – Local mode - is governed by regulation in force, the Acts mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the local mode set forth in the regulation, including those related to other subscriber classes, are
an integral part of this attachment as if they were included herein.
1.2. Local collect calls shall be charged based on the same tariff
criteria for calls charged at origin, excluding the time used for voicing warnings and acceptance of collect calls.
1.3. The tariffs
submitted herein are the maximum ones and net of taxes, except as provided in item 3.1.8.
2. Individual Access to the Switched Fixed
Telephony Service (STFC)
2.1. For access to the Switched Fixed Telephony Service, the Concessionaire may charge an Activation Fee, for
every one of the subscribers class, subject to the maximum limit of one hundred eleven reais and forty-six centavos (R$111.46), as defined in Act No. 6,777, of October 19, 2010.
2.2. For maintenance of the usage right, if applicable, the Concessionaries are authorized to charge a monthly subscription fee, according to the table below, as defined in Act No. 6,777 of
October 19, 2010.
|
|
|
|
|
Subscriber Class
|
|
R$
|
|
Residential
|
|
Twenty-six reais and sixty-two centavos (R$26.62)
|
|
Non-residential
|
|
Forty-three reais and eighty-three centavos (R$43.83)
|
|
Trunking
|
|
Forty-three reais and eighty-three centavos (R$43.83)
|
|
Special
|
|
Fifteen reais and ninety-seven centavos (R$15.97)
|
81
2.2.1. The subscription to the Local Switched Fixed Telephony Service includes two hundred (200) free
minutes for the residential class, pursuant to STFC Tariff Regulation provided in the public system.
2.2.2. The subscription to the Local
Switched Fixed Telephone Service includes one hundred fifty (150) free minutes for the non-residential and trunking classes, pursuant to STFC Tariff Regulation provided in the public system.
2.3. The change of address of an activated subscriber may be charged, and its value (TME) shall be limited to the Activation Fee of the respective
classes, as defined in the STFC Tariff Regulation provided in the public system.
3. Use of the Switched Fixed Telephony Service in the
Local Mode
3.1. Pursuant to applicable regulation, for invoiceable calls comprised in the Local Switched Fixed Telephony Service:
3.1.1. The use of the Local Switched Fixed Telephony Service, by subscribers of the residential, non-residential and trunking classes, shall
be charged as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be
thirty (30) seconds; or
b) per call answered, which is charged based on the application of a value per call answered (VCA), irrespective
of the call duration.
|
|
|
|
|
|
|
Days
|
|
Period
|
|
Measure system
|
|
From Mondays to Fridays from 6am to 12am
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
From Mondays to Fridays from 12am to 6am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Saturdays from 6am to 2pm
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
Saturdays from 12am to 6am and from 2pm to 12am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Sundays and Brazilian official holidays from 12am to 12am
|
|
Simple
|
|
Call
|
3.1.2. The use of the Local Switched Fixed Telephony Service by subscribers of the Special class (AICE) shall be charged
as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty
(30) seconds, without time modulation; or
b) per call completion tariff, irrespective of the time or duration of the call.
3.1.3. For tariffs for usage time, the maximum value for the tariff minute (MIN) is seven thousand eight hundred thirty-three hundredths of thousandths
of reais (R$0.07833), pursuant to Act No. 6,777 of October 19, 2010.
82
3.1.4. For call tariff, the maximum value for the answered call (VCA) is calculated based on the maximum
value of usage minute (MIN), pursuant to the STFC Tariff Regulation provided in the public system.
3.1.5. The maximum value for VCA, on the
date this Agreement is in force, is fifteen thousand six hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.6. The maximum value for the Completion Tariff, on the date this Agreement is in force, is fifteen thousand six hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act
No. 6,777 of October 19, 2010.
3.1.7. For local calls originated from collective usage accesses and designed for fixed terminals,
the measured usage time method will be adopted based on the value of the tariff unit (UTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the subsequent units at
every one hundred twenty (120) seconds.
3.1.8. The value of one UTP (VTP) is one thousand two hundred thirty tenths of thousandths of
reais (R$0.1230), including taxes, as defined in Act No. 6,777 of October 19, 2010.
3.2. Calls involving other telecommunications
services
3.2.1. The tariff criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
3.2.1.1. The tariff unit is the tenth of minute (six seconds).
3.2.1.2. The minimum tariff time is thirty (30) seconds.
3.2.1.3. The maximum communication
minute values involving the PMS (VC-1), per minute, for the normal tariff time and for the reduced tariff time, are shown in the table below, pursuant to Act No. 971 of February 9, 2010.
|
|
|
|
|
|
|
Destination PMS Provider
|
|
Normal tariff
|
|
Reduced Tariff
|
|
Americel S.A.
|
|
0.55600
|
|
0.38920
|
|
TIM Celular S.A.
|
|
0.54818
|
|
0.38372
|
|
Vivo S.A.
|
|
0.56133
|
|
0.39293
|
|
14 Brasil Telecom S.A.
|
|
0.54818
|
|
0.38372
|
3.2.1.4. The time of reduced tariff for calls addressed to PMS shall be Mondays to Saturdays from 12am to 7am and from
9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.2. The tariff criteria
and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
3.2.2.1. The tariff unit is the
tenth of minute (six seconds).
83
3.2.2.2. The minimum tariff time is thirty (30) seconds.
3.2.2.3. The maximum communication minute value involving the SMS (VC-1), per minute, is forty-seven thousand three hundred three hundredths of
thousandths reais (R$0.47303) for the normal tariff time, and thirty three thousand one hundred hundredths of thousandths of reais (R$0.33112) for reduced tariff time, as defined in Act No. 54,687 of December 12, 2005.
3.2.2.4. The reduced tariff time for calls addressed to the SMS shall be Mondays to Mondays to Saturdays from 12am to 7am and from 9pm to 12am, and on
Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.3. For calls originated in TUP (telephone
for public usage) and designed to other collective interest services, the respective communication values for counting of UTPs shall be adopted.
84
Exhibit 10.5
ATTACHMENT No. 3
BASIC LOCAL SERVICE PLAN
Brasil Telecom S.A.
Sector 28
1. General
1.1. The Basic Plan for Switched Fixed Telephony Services – Local mode - is governed by regulation in force, the Acts mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the local mode set forth in applicable regulation, including those related to other subscriber
classes, are an integral part of this attachment as if they were included herein.
1.2. Local collect calls shall be charged based on the same
tariff criteria for calls charged at origin, excluding the time used for voicing warnings and acceptance of collect calls.
1.3. The tariffs
submitted herein are the maximum ones and net of taxes, except as provided in item 3.1.8.
2. Individual Access to the Switched Fixed
Telephony Service (STFC)
2.1. For access to the Switched Fixed Telephony Service, the Concessionaire may charge an Activation Fee, for
every one of the subscribers class, subject to the maximum limit of one hundred one reais and sixty-six centavos (R$101.66), as defined in Act No. 6,777, of October 19, 2010.
2.2. For maintenance of the usage right, if applicable, the Concessionaries are authorized to charge a monthly subscription fee, according to the table below, as defined in Act No. 6,777 of
October 19, 2010.
|
|
|
|
|
Subscriber Class
|
|
R$
|
|
Residential
|
|
Twenty-six reais and seventy-nine centavos (R$26.79)
|
|
Non-residential
|
|
Forty-three reais and eighty-three centavos (R$43.83)
|
|
Trunking
|
|
Forty-three reais and eighty-three centavos (R$43.83)
|
|
Special
|
|
Sixteen reais and seven centavos (R$16.07)
|
2.2.1. The subscription to the Local Switched Fixed Telephony Service includes two hundred (200) free minutes for
the residential class, pursuant to STFC Tariff Regulation provided in the public system.
85
2.2.2. The subscription to the Local Switched Fixed Telephone Service includes one hundred fifty
(150) free minutes for the non-residential and trunking classes, pursuant to STFC Tariff Regulation provided in the public system.
2.3.
The change of address of an activated subscriber may be charged, and its value (TME) shall be limited to the Activation Fee of the respective classes, as defined in the STFC Tariff Regulation provided in the public system.
3. Use of the Switched Fixed Telephony Service in the Local Mode
3.1. Pursuant to applicable regulation, for invoiceable calls comprised in the Local Switched Fixed Telephony Service:
3.1.1. The use of the Local Switched Fixed Telephony Service, by subscribers of the residential, non-residential and trunking classes, shall be charged as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty (30) seconds; or
b) per call answered, which is charged based on the application of a value per call answered (VCA), irrespective of the call duration.
|
|
|
|
|
|
|
Days
|
|
Period
|
|
Measure system
|
|
From Mondays to Fridays from 6am to 12am
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
From Mondays to Fridays from 12am to 6am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Saturdays from 6am to 2pm
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
Saturdays from 12am to 6am and from 2pm to 12am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Sundays and Brazilian official holidays from 12am to 12am
|
|
Simple
|
|
Call
|
3.1.2. The use of the Local Switched Fixed Telephony Service by subscribers of the Special class (AICE) shall be charged
as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty
(30) seconds, without time modulation; or
b) per call completion tariff, irrespective of the time or duration of the call.
3.1.3. For tariffs for usage time, the maximum value for the tariff minute (MIN) is seven thousand eight hundred thirty-three hundredths of thousandths
of reais (R$0.07833), pursuant to Act No. 6,777 of October 19, 2010.
3.1.4. For call tariff, the maximum value for the answered
call (VCA) is calculated based on the maximum value of usage minute (MIN), pursuant to the STFC Tariff Regulation provided in the public system.
86
3.1.5. The maximum value for VCA, on the date this Agreement is in force, is fifteen thousand six hundred
sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.6. The maximum value
for the Completion Tariff, on the date this Agreement is in force, is fifteen thousand six hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.7. For local calls originated from collective usage accesses and designed for fixed terminals, the measured usage time method will be adopted based
on the value of the tariff unit (UTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the subsequent units at every one hundred twenty (120) seconds.
3.1.8. The value of one UTP (VTP) is one thousand two hundred thirty tenths of thousandths of reais (R$0.1230), including taxes, as defined
in Act No. 6,777 of October 19, 2010.
3.2. Calls involving other telecommunications services
3.2.1. The tariff criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
3.2.1.1. The tariff unit is the tenth of minute (six seconds).
3.2.1.2. The minimum tariff time is thirty (30) seconds.
3.2.1.3. The maximum communication
minute values involving the PMS (VC-1), per minute, for the normal tariff time and for the reduced tariff time, are shown in the table below, pursuant to Act No. 971 of February 9, 2010.
|
|
|
|
|
|
|
Destination PMS Provider
|
|
Normal tariff
|
|
Reduced Tariff
|
|
Americel S.A.
|
|
0.55600
|
|
0.38920
|
|
TIM Celular S.A.
|
|
0.54818
|
|
0.38372
|
|
Vivo S.A.
|
|
0.56133
|
|
0.39293
|
|
14 Brasil Telecom S.A.
|
|
0.54818
|
|
0.38372
|
3.2.1.4. The time of reduced tariff for calls addressed to PMS shall be Mondays to Saturdays from 12am to 7am and from
9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.2. The tariff criteria
and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
3.2.2.1. The tariff unit is the
tenth of minute (six seconds).
3.2.2.2. The minimum tariff time is thirty (30) seconds.
87
3.2.2.3. The maximum communication minute value involving the SMS (VC-1), per minute, is forty-seven
thousand three hundred three hundredths of thousandths reais (R$0.47303) for the normal tariff time, and thirty three thousand one hundred hundredths of thousandths of reais (R$0.33112) for reduced tariff time, as defined in Act No. 54,687 of
December 12, 2005.
3.2.2.4. The reduced tariff time for calls addressed to the SMS shall be Mondays to Mondays to Saturdays from 12am to
7am and from 9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.3. For
calls originated in TUP (telephone for public usage) and designed to other collective interest services, the respective communication values for counting of UTPs shall be adopted.
88
Exhibit 10.5
ATTACHMENT No. 3
BASIC LOCAL SERVICE PLAN
Brasil Telecom S.A.
Sector 29
1. General
1.1. The Basic Plan for Switched Fixed Telephony Services – Local mode - is governed by regulation in force, the Acts mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the local mode set forth in the regulation, including those related to other subscriber classes, are
an integral part of this attachment as if they were included herein.
1.2. Local collect calls shall be charged based on the same tariff
criteria for calls charged at origin, excluding the time used for voicing warnings and acceptance of collect calls.
1.3. The tariffs
submitted herein are the maximum ones and net of taxes, except as provided in item 3.1.8.
2. Individual Access to the Switched Fixed
Telephony Service (STFC)
2.1. For access to the Switched Fixed Telephony Service, the Concessionaire may charge an Activation Fee, for
every one of the subscribers class, subject to the maximum limit of sixty-seven reais and ninety-eight centavos (R$67.98) for subscribers of Ex-Sector 29 and thirty-one reais and eighty-nine centavos (R$31.89) for subscribers of Ex-Sector 30, as
defined in Act No. 6,777, of October 19, 2010.
2.2. For maintenance of the usage right, if applicable, the Concessionaries are
authorized to charge a monthly subscription fee, according to the table below, as defined in Act No. 6,777 of October 19, 2010.
|
|
|
|
|
Ex-Sector 29
Subscriber Class
|
|
R$
|
|
Residential
|
|
Twenty-nine reais and six centavos (R$29.06)
|
|
Non-residential
|
|
Forty reais and forty centavos (R$40.40)
|
|
Trunking
|
|
Forty reais and forty centavos (R$40.40)
|
|
Special
|
|
Seventeen reais and forty-three centavos (R$17.43)
|
89
|
|
|
|
|
Ex-Sector 30
Subscriber Class
|
|
R$
|
|
Residential
|
|
Twenty-nine reais and forty-one centavos (R$29.41)
|
|
Non-residential
|
|
Forty reais and forty-three centavos (R$40.43)
|
|
Trunking
|
|
Forty reais and forty-three centavos (R$40.43)
|
|
Special
|
|
Seventeen reais and sixty-four centavos (R$17.64)
|
2.2.1. The subscription to the Local Switched Fixed Telephony Service includes two hundred (200) free minutes for
the residential class, pursuant to STFC Tariff Regulation provided in the public system.
2.2.2. The subscription to the Local Switched Fixed
Telephone Service includes one hundred fifty (150) free minutes for the non-residential and trunking classes, pursuant to STFC Tariff Regulation provided in the public system.
2.3. The change of address of an activated subscriber may be charged, and its value (TME) shall be limited to the Activation Fee of the respective classes, as defined in the STFC Tariff Regulation
provided in the public system.
3. Use of the Switched Fixed Telephony Service in the Local Mode
3.1. Pursuant to applicable regulation, for invoiceable calls comprised in the Local Switched Fixed Telephony Service:
3.1.1. The use of the Local Switched Fixed Telephony Service, by subscribers of the residential, non-residential and trunking classes, shall be charged
as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time shall be thirty
(30) seconds; or
b) per call answered, which is charged based on the application of a value per call answered (VCA), irrespective of the
call duration.
|
|
|
|
|
|
|
Days
|
|
Period
|
|
Measure system
|
|
From Mondays to Fridays from 6am to 12am
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
From Mondays to Fridays from 12am to 6am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Saturdays from 6am to 2pm
|
|
Normal
|
|
Usage time
|
|
|
|
|
|
Saturdays from 12am to 6am and from 2pm to 12am
|
|
Simple
|
|
Call
|
|
|
|
|
|
Sundays and Brazilian official holidays from 12am to 12am
|
|
Simple
|
|
Call
|
90
3.1.2. The use of the Local Switched Fixed Telephony Service by subscribers of the Special class (AICE)
shall be charged as follows:
a) per Usage Time, and the tariff unit shall be the tenth of minute (six seconds) and the minimum tariff time
shall be thirty (30) seconds, without time modulation; or
b) per call completion tariff, irrespective of the time or duration of the
call.
3.1.3. For tariffs for usage time, the maximum value for the tariff minute (MIN) is seven thousand eight hundred thirty-three
hundredths of thousandths of reais (R$ 0.07833), pursuant to Act No. 6,777 of October 19, 2010.
3.1.4. For call tariff, the maximum
value for the answered call (VCA) is calculated based on the maximum value of usage minute (MIN), pursuant to the STFC Tariff Regulation provided in the public system.
3.1.5. The maximum value for VCA, on the date this Agreement is in force, is fifteen thousand six hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of
October 19, 2010.
3.1.6. The maximum value for the Completion Tariff, on the date this Agreement is in force, is fifteen thousand six
hundred sixty-six hundredths of thousandths of reais (R$0.15666), pursuant to Act No. 6,777 of October 19, 2010.
3.1.7. For local
calls originated from collective usage accesses and designed for fixed terminals, the measured usage time method will be adopted based on the value of the tariff unit (UTP), pursuant to the STFC Tariff Regulation provided in the Public system, with
the first unit being applied upon answering the call and the subsequent units at every one hundred twenty (120) seconds.
3.1.8. The
value of one UTP (VTP) is one thousand two hundred thirty tenths of thousandths of reais (R$0.1230), including taxes, as defined in Act No. 6,777 of October 19, 2010.
3.2. Calls involving other telecommunications services
3.2.1. The tariff criteria and procedures
involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
3.2.1.1. The tariff unit is the tenth of minute (six
seconds).
3.2.1.2. The minimum tariff time is thirty (30) seconds.
91
3.2.1.3. The maximum communication minute values involving the PMS (VC-1), per minute, for the normal
tariff time and for the reduced tariff time, are shown in the table below, pursuant to Act No. 971 of February 9, 2010.
|
|
|
|
|
|
|
Destination PMS Provider
Ex-Sector 29
|
|
Normal tariff
|
|
Reduced Tariff
|
|
Claro S.A.
|
|
0.52967
|
|
0.37076
|
|
Tim Celular S.A.-Region II
|
|
0.54383
|
|
0.38068
|
|
Tim Celular S.A.-Region ll-RS
|
|
0.54135
|
|
0.37894
|
|
Vivo S.A.
|
|
0.54135
|
|
0.37894
|
|
14 Brasil Telecom S.A.
|
|
0.54383
|
|
0.38068
|
|
|
|
|
|
Destination PMS Provider
Ex-Sector 30
|
|
Normal tariff
|
|
Reduced Tariff
|
|
Claro S.A.
|
|
0.53403
|
|
0.37382
|
|
Tim Celular S.A.-Region II
|
|
0.54818
|
|
0.38372
|
|
Tim Celular S.A.-Region ll-RS
|
|
0.54750
|
|
0.38199
|
|
Vivo S.A.
|
|
0.54570
|
|
0.38199
|
|
14 Brasil Telecom S.A.
|
|
0.54818
|
|
0.38372
|
3.2.1.4. The time of reduced tariff for calls addressed to PMS shall be Mondays to Saturdays from 12am to 7am and from
9pm to 12am, and on Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.2. The tariff criteria
and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
3.2.2.1. The tariff unit is the
tenth of minute (six seconds).
3.2.2.2. The minimum tariff time is thirty (30) seconds.
3.2.2.3. The maximum communication minute value involving the SMS (VC-1), per minute, is forty-seven thousand three hundred three hundredths of
thousandths reais (R$0.47303) for the normal tariff time, and thirty three thousand one hundred hundredths of thousandths of reais (R$0.33112) for reduced tariff time, as defined in Act No. 54,687 of December 12, 2005.
3.2.2.4. The reduced tariff time for calls addressed to the SMS shall be Mondays to Mondays to Saturdays from 12am to 7am and from 9pm to 12am, and on
Sundays and Brazilian official holidays from 12am to 12am, pursuant to applicable regulation.
3.2.3. For calls originated in TUP (telephone
for public usage) and designed to other collective interest services, the respective communication values for counting of UTPs shall be adopted.
92
AGÊNCIA NACIONAL DE TELECOMUNICAÇÕES
EXTRACT OF AGREEMENT PBOA/SPB No. 109/2011 – ANATEL
PARTIES: Agência Nacional de Telecomunicações – ANATEL and BRASIL TELECOM S.A. PURPOSE: Quinquennial amendment of the Concession Agreement for provision of Switch Fixed Telephony
Service (STFC) in the Local mode, set forth in Clause 3.2, for the establishment of new conditions, and new universalization and quality targets. LEGAL GROUNDS: Federal Law No. 9,472 of July 16, 1997 (General Telecommunications Law –
LGT). SIGNATORIES: For Anatel: RONALDO MOTA SARDENBERG - President and JOÃO BATISTA DE REZENDE – Board member. For Brasil Telecom S.A.: JOÃO DE DEUS PINHEIRO DE MACEDO – Executive Planning Officer and PAULO TODESCAN LESSA
MATTOS – Regulatory Officer and as WITNESSES: CRISTIAN CHARLES MARLOW and JOSÉ ROBERTO PEREIRA NEDER.
RONALDO MOTA
SARDENBERG
Chairman of the Board of Directors
93
Exhibit 10.6
AGREEMENT PBOA/SPB No. 143/2011 – ANATEL
AGREEMENT FOR
CONCESSION OF SWITCHED FIXED TELEPHONY SERVICE – NATIONAL LONG-DISTANCE (LDN) MODE - ENTERED INTO BETWEEN AGÊNCIA NACIONAL DE TELECOMUNICAÇÕES AND BRASIL TELECOM S.A.
By this agreement, the first party
Agência Nacional de Telecomunicações
, hereinafter referred to as Anatel, an entity that is
an integral part of the Brazilian Federal Government, and pursuant to Federal Law No. 9,472 of July 16, 1997, the General Telecommunications Law (LGT), responsible for exercising the Granting Power, hereby represented by its President
RONALDO MOTA SARDENBERG
, a Brazilian citizen, married, diplomat, holder of Identity Card (CI) No. 5601 MRE and enrolled with the Individual Taxpayer’s Registry (CPF/MF) under No. 075.074.884-20, together with Board Member
JOÃO BATISTA DE REZENDE
, a Brazilian citizen, divorced, economist, holder of Identity Card (CI) No. 3.412.238-5 SSP-PR and enrolled with the Individual Taxpayer’s Registry (CPF/MF) under No. 472.648.709-44, and the
second party
BRASIL TELECOM S.A.
, enrolled with the Ministry of Finance’s Corporate Taxpayers’ Registry (CNPJ/MF) under No. 76.535.764/0322-66 (sector 18); 76.535.764/0321-85 (sector 19); 76.535.764/0324-28 (sector 21);
76.535.764/0329-32 (sector 23); 76.535.764/0328-51 (sector 24); 76.535.764/0326-90 (sector 26); 76.535.764/0323-47 (sector 27); 76.535.764/0327-70 (sector 28) and 76.535.764/0002-24 (sector 29), by its Executive Planning Officer
JOÃO DE
DEUS PINHEIRO DE MACEDO
, a Brazilian citizen, married, engineer, holder of Identity Card (CI) No. 560064 20 SSP-BA and enrolled with the Individual Taxpayers’ Registry (CPF/MF) under No. 060.055.275-68, and by its Regulatory
Officer
PAULO TODESCAN LESSA MATTOS
, a Brazilian citizen, married, lawyer, holder of Identity Card (CI) No. 163.075 OAB-SP and enrolled with the Individual Taxpayers’ Registry (CPF/MF) under No. 188.745.248-62, hereinafter
referred to as the Concessionaire, pursuant to Article 207, paragraph 1, of the aforementioned General Telecommunications Law, hereby lawfully enter into this
CONCESSION AGREEMENT
, which shall be governed by the rules referred to below and by
the following clauses:
Chapter I – Purpose
Clause 1.1.
The purpose of this Agreement is the concession of Switched Fixed Telephony Service (
Serviço Telefônico Fixo Comutado – STFC
), or the STFC, designed for the
public use in general, provided in the public system, in the National Long-Distance Service mode, for calls originated in the geographic area defined in Clause 2.1., pursuant to the General Licensing Plan.
Sole paragraph.
It is understood that the Switched Fixed Telephony Service, provided in the public system in border and frontier
areas, shall be the subject to this concession, in conformity with the regulation issued by Anatel, pursuant to the provisions included in the General Licensing Plan.
Clause 1.2.
The STFC is the telecommunications service, which, by means of voice and
other signals transmission, is designed to allow the communication between determined fixed points by using telephony processes, pursuant to applicable regulation.
Clause 1.3.
Upon Anatel’s prior approval, the Concessionaire may implement and exploit new services, devices or facilities related to the provision of the service subject to this concession.
Sole paragraph.
Any services, devices or facilities which, at Anatel’s judgment, are deemed as inherent in or
supplementary to the service platform hereby granted, without characterizing any other service or type of service or any added value service, shall be deemed as related to the subject of this concession, subject to the provisions of applicable
regulation, especially the provisions set forth in article 222 of the Brazilian Federal Constitution of 1988.
Clause 1.4.
The Concessionaire is entitled to implement, expand and operate the telecommunications networks required for carrying out the service, as well as to its industrial exploitation, pursuant to applicable regulation.
Clause 1.5.
The obligation to meet the universalization and quality targets set forth in this Agreement is inseparable from the
service provision.
Clause 1.6.
The Concessionaire shall provide all requestors and users of the provided service with
the facilities required for service provision, pursuant to applicable regulation.
Clause 1.7.
The Concessionaire shall
provide free access to emergency public services set forth in applicable regulation, irrespective of the origin of the call from the Switched Fixed Telephony Service.
Chapter II – Service Coverage Area
Clause 2.1.
The
geographical areas for the provision of the service subject to this concession are those comprising the territory(ies) included in Sectors 18, 19, 21, 23, 24, 26, 27, 28 and 29, as listed in Attachment 2 to the General Licensing Plan, referring to
the Concession Agreements PBOA/SPB No. 142/2006-ANATEL, 143/2006-ANATEL, 145/2006-ANATEL, 147/2006-ANATEL, 148/2006-ANATEL, 150/2006-ANATEL, 151/2006-ANATEL, 152/2006-ANATEL, 153/2006-ANATEL and 154/2006-ANATEL.
Chapter III – Validity and Conditions for Amendments to Agreement
Clause 3.1.
The validity of this concession, granted on an onerous basis, shall end on December 31, 2025.
Clause 3.2.
This Agreement may be amended on June 30, 2011, December 31, 2015 and December 31, 2020 for the establishment of new conditions, new universalization and quality
targets, in view of the conditions then in force, and any supplementary resources shall be defined for the universalization targets, pursuant to Article 81 of Law No. 9,472 of 1997.
2
Paragraph 1
Twenty four (24) months before the amendments set forth in this
Clause, Anatel will cause the publication of a public inquiry with its proposal of new conditions and new quality and universalization targets, and these latter shall be submitted to the President of Republic’s approval, by means of a Decree,
pursuant to article 18, item III, of Law no. 9,472 of 1997.
I – The Public Consultation with the amendment proposals
expected for December 31, 2015 will be published by March 31, 2014.
Paragraph 2
The amendments
mentioned in this Clause do not exclude any possible amendment to this Agreement, at any time, in view of any supervening relevant fact, at Anatel’s discretion.
Paragraph 3
Anatel shall guarantee the protection of the Concessionaire’s economic situation, pursuant to Chapter XIII of this Agreement.
Clause 3.3.
The Concessionaire shall pay, every two years, during the concession period, lien corresponding to two percent
(2%) of its revenues, earned in the year before the payment year, from the Switched Fixed Telephony Service, net of any levied taxes and social contributions.
Paragraph 1
In the event of compliance with the obligation set forth in the main provision, costs originating from the application of new universalization obligations may be considered, pursuant to
the General Plan on Universal Service approved by the President of the Republic by means of a Decree.
Paragraph 2
The
calculation of the amount referred to in the preamble to this Clause shall include net revenues arising from application of the basic and alternative service plans subject to this concession, which includes interconnection revenues, PUC, and also
other additional services and operating revenues as determined by the Agency.
Paragraph 3
The percentage referred to
in the preamble to this Clause shall be always calculated in relation to revenues less taxes and contributions, determined between January and December of the prior year and obtained from the financial statements prepared in accordance with
Brazilian corporation law and basic accounting principles, approved by the Concessionaire’s management and audited by independent auditors, and the payment shall mature on April 30 of the year subsequent to the determination of the lien.
Paragraph 4
The first installment of the lien shall mature on April 30, 2007, calculated including the net
revenues determined from January 1 to December 31, 2006, and the subsequent installments shall mature at every twenty four (24) months, with the prior year’s revenues as the calculation basis.
Paragraph 5
Any delay in the payment of the lien set forth in this Clause shall cause the payment of a late payment fine of
thirty three-tenths of one percent (0.33%) per day, up to the limit of ten percent (10%), plus the SELIC (Special System for Settlement and Custody) reference rate for federal securities to be applied on the debt amount considering all delayed
payment days.
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Chapter IV – Manner, Terms and Conditions of Service Provision
Clause 4.1.
The use of radiofrequencies in the provision of the service subject to this concession shall be authorized by Anatel,
on onerous basis and without exclusivity, except for any provision to the contrary in applicable regulation, pursuant to articles 83 and 163 of Law No. 9,472 of 1997.
Paragraph 1
The Concessionaire shall be entitled to the extension, on onerous basis and without exclusivity, of the radiofrequency usage authorizations used at this Agreement’s execution
date and which are necessary for the service provision continuity.
Paragraph 2
The amount to be paid by the
extension mentioned in the paragraph above shall not imply any change to the lien amount referred to in Clause 3.3 of this Agreement.
Paragraph 3
The right to use radiofrequencies referred to in this Clause shall not eliminate the prerogative granted to Anatel by article 161 of Law No. 9,472 of 1997.
Paragraph 4
Any new radiofrequencies to be required by the Concessionaire shall have its usage authorized, on onerous basis,
with the compliance with the procedures defined by Anatel for similar authorizations.
Paragraph 5
The
authorizations for usage of the radiofrequencies subject to this Clause shall expire together with this concession.
Paragraph 6
The return to Anatel of any radiofrequencies not required for the continuity of the service provision shall not
imply any changes to the lien amount fixed in Clause 3.3.
Clause 4.2.
The Concessionaire shall agree to provide the
service subject to this concession in such a way to fully comply with the universalization and continuity obligations inherent in the public system, which is fully applicable to the Concessionaire, by following the criteria, formulas and parameters
defined in this Agreement.
Sole paragraph.
Any noncompliance with the universalization and continuity obligations
shall give rise to the application of sanctions set forth in this Agreement, cause Anatel’s intervention in the Concessionaire, and, if applicable and according to the seriousness or if the intervention order is inconvenient, mild or
unreasonably beneficial to the Concessionaire or unnecessary, it shall imply the forfeiture of the concession, pursuant to Clause 27.4.
Clause 4.3.
The Concessionaire shall exploit the service subject to the concession at its own account and risk, under the broad and fair competition system set forth in Law No. 9,472 of 1997
and the General Licensing Plan, and the Concessionaire shall be compensated for the tariffs charged and any possible supplementary or accessory revenues it receives pursuant to this Agreement.
Sole paragraph.
The Concessionaire shall not be entitled to any exclusivity nor may it claim any right in connection with the
admission of new providers of the same service, in the public or private system.
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Clause 4.4.
Throughout the concession validity period, the Concessionaire shall agree
to meet the service quality, comprehensiveness and offering commitments stated in this Agreement, irrespective of the competition environment in the geographical area where the service will be exploited.
Clause 4.5.
The Concessionaire shall agree to keep and preserve all assets, equipment and facilities employed in the service in
perfect operating conditions, by maintaining and repairing its units and promoting, on a timely basis, any replacements required in view of wear and tear or technological obsolescence, or also promoting any repairs or modernizations required to the
good performance of the service and the preservation of adequate service, as set forth in this Agreement.
Chapter V – Rules for
Service Implementation, Expansion, Change and Modernization
Clause 5.1.
The expansion and modernization of the
service granted are basic requirements of this concession, subject to the targets and criteria stated in this Agreement.
Sole paragraph.
Anatel may determine any changes to the service implementation, expansion and modernization targets, subject to
the Concessionaire’s right not to be obliged to bear any additional costs not recoverable with the revenues arising from meeting these targets by means of the efficient service exploitation.
Clause 5.2.
Any changes to the service provision conditions may occur due to Anatel’s determination or upon its prior express
approval.
Clause 5.3.
The service modernization shall be sought through the constant introduction of equipment,
processes and means able to provide the user with a service consistent with the present time, in view of technologies available in the market.
Chapter VI – Service Quality Criteria and Indicators
Clause 6.1.
The proper quality of the service provided by the Concessionaire is a requirement for this concession, and it shall be construed as the service meeting the conditions of regularity,
efficiency, security, present time, generality, courtesy and feasibility of tariffs.
Paragraph 1
Regularity shall
be characterized by the ongoing service provision with strict compliance with the rules issued by Anatel.
Paragraph
2
Efficiency shall be characterized by achieving and preserving any parameters included in this Agreement and by serving the user within the time limits set forth in this Agreement.
Paragraph 3
Security in service provision shall be characterized by the confidentiality of the data related to the usage of
services by the users, as well as by the full preserved secrecy of the information transmitted within the scope of its provision, pursuant to the provisions of Chapter XV.
Paragraph 4
Present time shall be characterized by modern equipment, facilities and techniques for service provision, with the use of technological developments arising along
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the concession period, which, definitely, bring benefits to the users, subject to the provisions in this Agreement.
Paragraph 5
Generality shall be characterized by the equitable provision of the service to any and all users, and the Concessionaire shall agree to provide the service to whoever requests it
in the location appointed by the requestor, pursuant to the provisions in this Agreement and according to regulation.
Paragraph 6
Courtesy shall be characterized by the respectful and prompt service to all users of the service granted, as well
as the compliance with the obligations to report and promptly and politely serve everyone who, whether users or not, request any information, arrangements or any type of request to the Concessionaire, pursuant to the provisions in this Agreement.
Paragraph 7
The principle of tariff feasibility shall be characterized by the Concessionaire’s efforts to
adopt tariffs lower than those fixed by Anatel.
Clause 6.2.
The Concessionaire shall comply with the General Quality
Targets Plan parameters and indicators.
Sole paragraph.
The Concessionaire shall disclose, until April 30 of
every year, a statement showing the compliance with the General Quality Targets Plan and the General Plan on Universal Service, pursuant to applicable regulation.
Clause 6.3.
In addition to the follow-up and control over quality indicators, Anatel shall evaluate, from time to time, the level of users’ satisfaction with the services hereby granted, and
may disclose the Concessionaire’s results, comprising at least the following aspects:
I – user service, especially
with respect to access facility, promptness, courtesy, speed and efficiency in responding to requests and complaints;
II
– tariffs and prices charged, as well as any discounts offered;
III – quality of service provided; and
IV – adequacy of quality of the services offered to the users’ needs.
Chapter VII – Continuity of Services
Clause 7.1.
The
continuity of the services hereby granted, an essential element to its provision, shall be characterized by the non-interruption of services, subject to any suspension due to users’ default, pursuant to Clause 9.2 and article 3, item VII of Law
No. 9,472 of 1997.
Sole paragraph.
Any exceptional interruption of the service, arising from an emergency
situation due to technical or installation security reasons, shall not be deemed as a breach of continuity if the Concessionaire reports the users affected and, in relevant cases, also forwards a detailed notice to Anatel. Under the rules issued by
Anatel and the Brazilian Consumer Defense Code, users will be assured of the right to obtain credit in proportion to the
6
time during which the service was not available and of the eventual reimbursement of any amounts unduly paid.
Clause 7.2.
Under no circumstances may the Concessionaire interrupt the provision of services by alleging any noncompliance by Anatel or the Federal Government with any obligation, and the
exception for contractual default may not be invoked by the Concessionaire.
Chapter VIII – The Universalization Targets
Clause 8.1.
The service universalization is an essential feature of the service provision system hereby granted and
shall be characterized by the consistent and equitable service to all users and by meeting the targets stated in the General Plan on Universal Service, attached hereto, approved by the Executive Branch, pursuant to articles 18, item III, and 80 of
Law No. 9,472 of 1997.
Clause 8.2.
The implementation costs related to the universalization targets stated in the
General Plan on Universal Service, attached hereto, shall be the responsibility of the Concessionaire.
Clause 8.3.
In
addition to the provisions in Clause 8.2., the Concessionaire shall agree to implement universalization targets not set forth in this Agreement to be required by Anatel, subject to the following:
I – Anatel will inquire the Concessionaire on the total costs for implementing the intended additional targets and on the portion of
these targets that may not be repaid by the exploitation revenues, but will be covered by a specific payment, specifically pointing out the purposes to be met and the selected technologies, as well as the implementation location and time;
II – if, upon expiration of the period fixed in the inquiry, the Concessionaire fails to state a position, then Anatel
will take any required measures to determine the liens and costs with the implementation of these targets, as well as to estimate the corresponding revenue generation;
III – if the Concessionaire responds the inquiry, Anatel will check whether the submitted costs and revenue estimates are accurate and consistent, taking into account the available technologies,
prices of inputs and labor force, geographic and socio-economic characteristics of the demand to be met, prices charged in the market and other variables deemed as relevant;
IV – in the event it does not deem the costs and/or revenue estimate as reasonable, Anatel may reasonably demand the implementation of targets to the Concessionaire, defining the refund amount,
subject to the provisions in Chapter XXXIII; and
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V – if, according to Anatel, the refund amounts are accurate and consistent, Anatel
will confirm to the Concessionaire the demand for implementation of these specific targets, pursuant to the proposed refund forwarded to the Concessionaire.
Paragraph 1
If, after the procedure set forth in this Clause, Anatel deems the implementation of a specific universalization target through the Concessionaire as inconvenient or not feasible,
then Anatel shall contract such target with another party by means of specific and limited service licenses, subject to economic parameters obtained from the procedure set forth in this Clause.
Paragraph 2
At Anatel’s discretion, the procedure set forth in this Clause may also be used to define the refundable
amounts in the event the targets set forth in this Agreement are accelerated.
Clause 8.4.
The adoption of the
procedures set forth in the foregoing Clause shall be Anatel’s option, which may adopt it at its discretion and according to the best public interests, and the Concessionaire shall not be entitled to any preference right in the implementation
of these targets.
Chapter IX – Rules on Suspension of Services due to Default and at Subscriber’s Request
Clause 9.1.
Any subscriber to the service subject to this concession may obtain, upon request and at any time, the suspension of
service, pursuant to applicable regulation.
Clause 9.2.
The Concessionaire may only suspend service to a subscriber
who fails to meet the debt payment directly arising from the use of the service granted, subject to applicable regulation, the subscriber shall be guaranteed a period to challenge the debts charged against him/her.
Paragraph 1
The Concessionaire shall report the suspension to the user in advance, as set forth in applicable regulation.
Paragraph 2
Any default of debts not directly related to the service subject to this concession, pursuant to
Clause 11.6, shall not give rise to any suspension of service addressed in this Clause.
Clause 9.3.
The Concessionaire
shall ensure the subscriber the right to have the access to offered services, devices and facilities temporarily or permanently blocked, as well as to any added value services, whenever requested by the subscriber, pursuant to applicable regulation.
Clause 9.4.
In the event the subscriber’s default is solely related to the payment of services provided by a
Switched Fixed Telephony Service provider other than the one provided and which is subject to joint billing by the Concessionaire, then the suspension of service shall follow the specific procedure subject to Anatel’s regulation.
8
Chapter X – The Numbering Plan
Clause 10.1.
The Concessionaire shall agree to comply with the Numbering Regulation for the Switched Fixed Telephony Services, and
shall provide the subscriber with the access code portability, pursuant to applicable regulation.
Paragraph 1
The
Concessionaire shall bear the costs arising from applicable regulation referred to in the preamble to this Clause.
Paragraph 2
Any costs related to the resources required to enable the access code portability implementation and operation
may be fully assumed by the Concessionaire in the event it is related to the latter’s network.
Paragraph
3
Any costs related to common resources required to the access code portability implementation and operation shall be assumed by the service providers, pursuant to applicable regulation.
Paragraph 4
Any costs related to management of the consignation and occupation process of the Numbering Resources described
in the Numbering Regulation for the Switched Fixed Telephony Services shall be assigned to the Concessionaire, pursuant to the Numbering Resources management rules defined by Anatel.
Chapter XI – Tariffs System and Collection from Users
Clause 11.1.
The Concessionaire must offer to all users the Basic Plan for National Long-Distance Services, Attachment 2, which is an integral part of this Agreement.
Sole paragraph.
The Basic Plan for National Long-Distance Services shall be unique for the each sector of the PGO referred to in Clause 2.1 and contain, under the terms defined by Anatel, maximum
values for each tariff structure item defined for the provision of the Switched Fixed Telephony Service, and these values shall be reviewed and adjusted in conformity with applicable rules.
Clause 11.2.
The Concessionaire may offer to its users the Alternative National Long-Distance Services Plan, with characteristics
different from those stated in the Basic Plan for National Long-Distance Services.
Paragraph 1
The subscriber shall be
entitled to move along the several National Long-Distance Service Plans offered by the Concessionaire, pursuant to applicable regulation.
Paragraph 2
The structure for tariffs, values and other characteristics associated to the Alternative National Long-Distance Service Plans shall be proposed by the Concessionaire at its discretion,
subject to the provisions in Clause 11.1.
Paragraph 3
The Concessionaire shall agree to offer to users its Alternative
National Long-Distance Services Plans, on a equitable basis and subject to the terms defined by the Concessionaire.
9
Paragraph 4
The Alternative National Long-Distance Service Plans shall be authorized
by Anatel.
Paragraph 5
After the fifteen (15)-day period elapses, counted from the receipt of the proposal,
without Anatel stating its position on the request, the Alternative National Long-Distance Service Plans may be traded and shall remain subject to Anatel’s approval.
Paragraph 6
In view of the society’s needs for services, Anatel may define specific alternative plans to be implemented by concessionaires, pursuant to applicable regulation.
Clause 11.3.
The Concessionaire may grant discounts to tariffs of the Plan for National Long-Distance Services, provided that they
are granted on an equal and equitable basis, with the subjective reduction of values being barred, and subject to the fair competition principle.
Sole paragraph.
In compliance with regulation, the Concessionaire shall agree to disclose any tariff discounts to its users in advance, by giving them broad and previous advertising and reporting
this decision to Anatel no longer than seven (7) days after the date the reduced tariff comes into effect.
Clause
11.4.
The Concessionaire shall agree to broadly advertise the tariffs charged by the service subject to this concession, pursuant to Anatel’s regulation.
Clause 11.5.
Upon implementation of new services, devices or facilities related to the service subject to this concession, the Concessionaire shall submit the proposed tariff to Anatel’s
approval, without which the Concessionaire will not be able to charge any tariff or price thereof.
Clause 11.6.
The
bill invoices issued by the Concessionaire shall be detailed, clear, explanatory and sealed, and detail the type and quantity of each service provided to the subscriber, pursuant to applicable regulation.
Paragraph 1
Pursuant to this Agreement, the Concessionaire shall clearly and explicitly state in the bill invoice the amounts
due by the subscriber to other collective interest telecommunications service providers, with fair and equitable conditions guaranteed.
Paragraph 2
The Concessionaire may state in the bill invoice, provided it is clearly and explicitly stated, any amounts due by the subscriber in view of other services, devices or facilities
related to the service provided.
Paragraph 3
The inclusion of any amounts in the bill invoice related to the provision
of added value services or any other amounts due that do not originate exclusively from the STFC shall be prohibited without the express subscriber’s consent.
Clause 11.7.
The Concessionaire shall charge network usage fees from other telecommunications service providers, subject to applicable regulation.
Clause 11.8.
The Concessionaire shall offer a discount to any subscriber affected by possible interruptions in the service
provided, provided that these interruptions had not been
10
caused by the subscriber, and these discounts shall be proportional to the interruption period, pursuant to applicable regulation.
Chapter XII – Tariff Adjustment
Clause 12.1.
At each interval
not shorter than twelve (12) months, by Anatel’s or the Concessionaire’s initiative, subject to the economy legislation in force, the tariffs stated in the Basic Plan for National Long-Distance Services, attachment 2 hereto, may be
adjusted based on the formulas below:
Of which:
Where:
T
ijt
= tariff proposed in the Basic Plan for National Long-Distance Services for time j, in the i distance tariff step, net of taxes levied.
T
ijto
= tariff prevailing in the Basic Plan for National Long-Distance Services for time j, in the i distance tariff step,
net of taxes levied.
M
ijto
= minutes of the National Long-Distance Service noted in the Basic Plan for National Long-Distance Services
in time j, in the i distance tariff step, since the last tariff adjustment.
MT
= total minutes of the National
Long-Distance Service noted in the Basic Plan for National Long-Distance Services since the last tariff adjustment.
i =
distance tariff step of the National Long-Distance Service included in the Service Tariff Structure.
j =
tariff
time of the National Long-Distance Service included in the Service Tariff Structure.
t =
proposed date for adjustment.
to =
last adjustment date; and
Where:
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IST =
tariff adjustment ratio, composed based on existing price ratios, pursuant to
applicable regulation.
k = X + FA
X =
transfer factor
FA =
repayment factor.
Paragraph 1
For the period from January 1, 2006 to December 31, 2007, the X transfer factor shall be defined by
Anatel based on a simplified methodology that includes, among others, the physical and economic data related to the national long-distance minute, as well as material, personal, services and depreciation factors.
Paragraph 2
As from January 1, 2008, the X transfer factor shall be defined by Anatel based on a methodology that
considers the optimization of service provision costs, pursuant to applicable regulation.
Paragraph 3
In the
event the value resulting from the calculation of the X transfer fact is negative, the value zero (0) shall be adopted.
Paragraph 4
The repayment factor value is:
I – zero (0) for IST variations, in the period under analysis, up to ten percent (10%);
II – one hundredth (0.01) for IST variations, in the period under analysis, higher than ten percent (10%) and up to twenty percent (20%).
III – two hundredth (0.02) for IST variations, in the period under analysis, higher than twenty percent (20%).
Paragraph 5
In the event the adjustment period involves different transfer factors values, the transfer factor value shall be
calculated by using the following formula:
Where:
X
1
= transfer
factor year 1
X
2
= transfer factor year 2
n
1
= number of
months year 1
n
2
= number of months year 2
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Paragraph 6
In the event the last adjustment date is earlier than the date this
Agreement came into effect, the adjustment shall be progressively applied taking into account the periods involved and the respective prevailing formulas and criteria.
Paragraph 7
New criteria for tariff follow-up, including transfer factor values, may be defined by Anatel upon any amendment to this Agreement, pursuant to Clause 3.2., and shall consider the
conditions prevailing at the time.
Paragraph 8
Tariff freedom, when applicable, shall be subject to a Normative Ruling
from Anatel.
Clause 12.2.
The follow-up of National Long-Distance Network Usage Fees shall comply with the provisions
in Clause 25.2 and in applicable regulation.
Sole paragraph.
New follow-up criteria of the National Long-Distance
Network Usage Fees may be defined by Anatel upon any amendment to this Agreement, pursuant to Clause 3.2. and shall consider the conditions prevailing at the time.
Clause 12.3.
The follow-up of the STFC tariffs in the National Long-Distance mode, in calls involving other telecommunications services, shall comply with specific regulation.
Chapter XIII – Protection to the Concessionaire’s Economic Situation and Tariff Review
Clause 13.1.
The preservation, under a fair competition system, of the fair equivalence between service provision and compensation
is a basic requirement of this Agreement, and the unjust enrichment at the other party’s or the service users’ expense shall be barred, pursuant to the provisions in this Chapter.
Paragraph 1
The Concessionaire shall not be obliged to bear any losses arising from this Agreement, except if those losses
arise from any of the following factors:
I – its own negligence, ineptitude or omission in exploiting the business;
II – any risks which are usual to the business activity;
III – inefficient management of its business, including the one characterized by the payment of operating and administrative costs
inconsistent with market parameters; or
IV – its failure to take advantage of market opportunities, including the
expansion, broadening and improvement in the provision of the service subject to this concession.
Paragraph 2
The
Concessionaire’s unjust enrichment shall also be prohibited if it arises from the following factors:
I – achieving
economic gains not directly arising from its business efficiency, especially when resulting from new rules issued on the service; and
13
II – transferring revenues to third parties, to the detriment of the principle of
tariff feasibility, pursuant to paragraph 7 of Clause 6.1.
Paragraph 3
The Concessionaire shall be entitled to
have its original charges and remuneration situation restored when acts of God or catastrophes significantly affect the service exploitation, always subject, as a benchmark, to the effects of these situations on service providers in the private
system.
Paragraph 4
The adequacy of the recovery referred to in the paragraph above shall be evaluated taking
into account, among other factors, any existing coverage of the event which triggered the change to the initial financial position by the Insurance Plan set forth in Clause 24.1.
Clause 13.2.
The restoration to the financial situation of the Agreement shall be applicable when it is evidenced that the factors
stated in paragraph 1 of the preceding Clause did not occur, and such restoration shall be preferably carried out through tariff review or any other mechanism which, at Anatel’s discretion, is deemed to be efficient to neutralize the then noted
situation.
Paragraph 1
The tariff review shall keep back any other mechanism to neutralize the parties’
unjust enrichment, by causing the event it referred to become obsolete.
Paragraph 2
The arrangement adopted to
neutralize any distortion shall be unique, complete and final with respect to the event giving rise to such distortion.
Clause 13.3.
Irrespective of the provisions in Clause 13.1 above, there shall be a review of the tariffs comprising the Basic Plan
for National Long-Distance Services in favor of the Concessionaire or the users, pursuant to article 108 of Law No. 9,472 of 1997, in the event of one of the following specific situations:
I – unilateral amendment to this Agreement imposed by Anatel, involving significant variation (for above or below) of costs or
revenues, so that the rise or drop in tariffs is imposed due to the need to prevent the unjust enrichment of any of the parties;
II – change to the tax system subsequent to the execution of this Agreement giving rise to any increase or reduction in the
Concessionaire’s potential profitability;
III – supervening events, arising from any de facto or administrative
events, which proven result in change to the Concessionaire’s costs;
IV – any specific legislative event directly
impacting the Concessionaire’s revenues in such a way that it will affect its continuity or the quality of the service provided; or
V – any legislative change resulting in benefits to the Concessionaire, including any changes granting or eliminating exemptions, reductions, discounts or any
14
other tax or tariff privilege, pursuant to paragraph 3 of article 108 of Law No. 9,472 of 1997.
Paragraph 1
Any loss or decrease in the Concessionaire’s gains caused by the free exploitation of services under fair conditions or by the inefficient management of its business shall not
give rise to a tariff review.
Paragraph 2
The event of tariff review set forth in item II of the preamble to this
Clause shall not be applied if the tax change implies the creation, elimination, increase or decrease in taxes levied on the Concessionaire’s income or earnings, such as income tax, which do not imply administrative or operating encumbrance.
Paragraph 3
No tariff review shall be applied in the events set forth in this Clause when the events triggering
the review are already covered by the Insurance Plan set forth in Clause 24.1.
Paragraph 4
The
Concessionaire’s contributions to the Universal Telecommunications Service Fund (FUST) and the Fund for the Technological Development of Telecommunications (FISTEL) shall not give rise to tariff review.
Clause 13.4.
The tariff review shall not be applicable upon characterization that the impacts causing the Concessionaire’s
request may be neutralized by the efficient exploitation of service, the market expansion or generation of alternative or supplementary revenues associated to the service subject to this Agreement, subject to current competitive conditions.
Sole paragraph.
The decrease in revenues arising from discounts or reduced tariffs shall not give rise to tariff
review.
Clause 13.5.
The tariff review procedure may be started upon Concessionaire’s request or Anatel’s
determination.
Paragraph 1
When the tariff review procedure is started by the Concessionaire, the following
requirements shall be met:
I – being supported by a technical report or expert appraisal report fully showing the impact
of the event on the tariff composition or the Concessionaire’s revenue estimate;
II – being supported by all
documents required for showing the reasoning of the request;
III – the Concessionaire shall state its intended tariff
review, by reporting the impacts and possible alternatives for tariff balancing; and
IV – all costs on diligence and
studies required for the full finding of facts shall be the responsibility of the Concessionaire.
Paragraph 2
The
tariff review procedure started by Anatel shall be reported to the Concessionaire granting a time limit for it to state a position, supported by a copy of the
15
appraisal reports and studies conducted to characterize the situation giving rise to the tariff review.
Paragraph 3
The tariff review procedure shall be concluded no longer than one hundred twenty (120) days, except for the event in which the extension of this deadline is required to
supplement the finding of facts.
Paragraph 4
The requirement shall be approved by Anatel, and the Concessionaire
shall provide the broad disclosure of the new maximum reviewed tariff values, pursuant to the provisions in this Agreement.
Chapter XIV
– Alternative, Supplementary and Accessory Revenues
Clause 14.1.
The Concessionaire may obtain other
alternative sources of revenues, provided that it does not imply the noncompliance with any provisions stated in the Telecommunications Services Regulations and other rules issued by Anatel.
Paragraph 1
The Concessionaire, its affiliates, subsidiaries or controlling parties shall not condition, directly or indirectly,
the service offer hereby granted to the matched consumption of any other service, pursuant to applicable regulation and the Brazilian Consumer Defense Code.
Paragraph 2
The service offer hereby granted jointly with other services shall comply with the provisions in applicable regulation and the Brazilian Consumer Defense Code.
Clause 14.2.
Anatel may determine that the Concessionaire offers services, devices or facilities related to the service subject to
this concession to users, and in this case the parties shall adjust the unit prices of these services, subject to market parameters and the right to fair remuneration.
Chapter XV – Users’ and Other Service Providers’ Rights and Guarantees
Clause 15.1.
Subject to the rules and parameters included herein, the following are the rights entitled to users of the service subject to this concession:
I – access to service and its fruition within the quality, regularity and efficiency standards set forth in this Agreement,
attachments hereto and rules in force;
II – to obtain by request the suspension of the service provided by the
Concessionaire or the rescission of the service agreement;
III – equitable treatment in connection with the conditions to
service access and fruition;
IV – obtaining appropriate information with respect to service provision conditions, tariffs
and prices charged;
16
V – inviolability and secrecy of their communications, subject to any constitutional
and legal event and conditions and breach of telecommunications secrecy;
VI – freely obtaining the non-disclosure of
their access code, upon request forwarded to the user service center provided by the Concessionaire;
VII – non-suspension
of service without the user’s request, except for the event of any debt directly arising from its use or noncompliance with the duties stated in article 4 of Law No. 9,472 of 1997;
VIII – being previously aware of any and all changes to service provision conditions, which directly or indirectly affect him/her;
IX – privacy in bill invoices and in the usage of their personal data by the Concessionaire;
X – efficient and ready response to requests and complaints by the Concessionaire;
XI – forwarding of any complaints or representations against the Concessionaire to Anatel and defense consumer bodies;
XII – cure of any damages arising from the breach of their rights;
XIII – having the terms of the service agreement met;
XIV – freely choosing the provider of national and international long-distance telephony services;
XV – not being obliged or induced to consume services or acquire any assets or equipment he/she is not interested in, nor being compelled to submit to any conditions in exchange of which he/she will
receive the service subject to this concession, pursuant to applicable regulation and the Brazilian Consumer Defense Code;
XVI
– obtaining, previously to the collection, any information on the re-inclusion of debts challenged when the complaint is deemed as groundless; and
XVII – the billing of services outside regulatory time limits shall be submitted in a separate invoice and upon prior negotiation with the user.
Paragraph 1
The Concessionaire shall comply with the duty to strictly care for the secrecy inherent in the telephony service
and for the confidentiality of the data and information, by employing means and technologies to guarantee this user’s right.
Paragraph 2
The Concessionaire shall provide the technological resources required for suspending the secrecy of telecommunications determined by judicial authority, pursuant to applicable
regulation.
17
Paragraph 3
In addition to the legal, contractual and regulatory provisions, the
Concessionaire shall comply with the other consumer protection rules, especially Law No. 8,078 of September 11, 1990 and Decree No. 6,523 of July 31, 2008.
Clause 15.2.
In addition to the rights referred to in the preceding Clause, the other telecommunications services providers shall be entitled to the following rights:
I – interconnection to the Concessionaire’s network under economic and operating equitable conditions, under proper technical
conditions and at equal and fair prices that strictly meet the service provision requirements, subject to the regulation issued by Anatel;
II – receiving the service requested from the Concessionaire on an equitable basis, at market or other prices negotiated by the parties and including any applicable reductions in view of prevented
costs, including those arising from large consumption, subject to applicable regulation;
III – obtaining all information
required for provision of the services operated by these providers, including those related to billing, except for the Concessionaire’s right to preserve its data covered by business secrecy, as well as third parties’ rights; and
IV – accessing the Concessionaire’s telecommunications networks under non-discriminatory and egalitarian conditions,
in a manner coherent with its business practices, pursuant to the General Plan on Competition Targets to be issued by Anatel.
Paragraph 1
Any conflicts arisen between the Concessionaire and other service providers shall be settled on the
administrative level by Anatel, pursuant to applicable regulation.
Paragraph 2
Anatel may, based on an
injunction, establish the conditions required for settling the conflict, including the definition of amounts, deadlines and any other elements fundamental to the effectiveness of the injunction decision.
Paragraph 3
Anatel shall follow up, on an ongoing basis, the relationship between service providers using the service hereby
granted and the Concessionaire, in order to prevent any behaviors which may give rise to unfair losses to any of the parties or breaches of the economic order and free competition, by reporting, in these events, such behaviors to the Administrative
Economic Defense Council (CADE), after exercising its jurisdiction, pursuant to article 19, item XIX, of Law No. 9,472 of 1997.
Clause 15.3.
Subject to applicable regulation, any user shall be entitled to the provision and fruition of added value services, which shall be carried out under technically proper conditions and
at equal and fair prices, and the Concessionaire shall be prohibited to establish any obstacle or restriction to the fruition of the service hereby granted.
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Sole paragraph.
Added value services shall be construed as all activities adding new
facilities to the service subject to this concession, without mingling with it, in connection with the access, storage, presentation, handling or recovery of information.
Chapter XVI – Concessionaire’s Rights, Guarantees and Obligations
Clause 16.1.
In addition to other obligations arising from this Agreement and inherent in the service provision, the Concessionaire
shall be responsible for:
I – providing the service with full compliance with the provisions in this Agreement, by fully
complying with the regulation issued by Anatel;
II – implementing all equipment and facilities required for the
provision, continuity, modernization, expansion and universalization of the service subject to this concession, within the specifications stated in this Agreement;
III – keeping the telecommunications network in perfect operating and working conditions, with respect to the quantity, extension and locations pertinent and sufficient to the proper service
provision;
IV – providing the financial resources required to meet the universalization and continuity parameters stated
in this Agreement and to the proper service provision;
V – providing Anatel with, in the manner and frequency set forth
in regulation, any technical, operating, economic, financial and accounting accounts and information, as well as supplying all requested data and elements related to the service;
VI – providing public usage terminals, permanent or temporary, in the format set forth in this Agreement;
VII – submitting itself to Anatel’s inspection, monitoring and control by enabling the access by Anatel’s agents to the
facilities related to the service, as well as to its accounting, technical, commercial, economic-financial and operational records, among others;
VIII – keeping separate accounting records for the STFC mode subject to this Agreement, according to the defined chart of accounts, as well as having the inventory of the company’s fixed assets
and components updated, pursuant to applicable regulation;
IX – keeping a user service and information system as set
forth in Clause 16.7;
X – caring for the integrity of assets related to the service provision;
XI - submitting, for Anatel’s approval, prior to its usage, the draft of the Standard Agreement to be entered into with subscribers,
as well as all changes, amendments or variations applicable thereto;
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XII – submitting, for Anatel’s prior approval, any operating, service, association
or partnership agreements intended to be entered into with foreign entities;
XIII – forwarding, for publication in
Anatel’s Library, a copy of the agreements and contracts related to the provision of the services hereby granted with Brazilian and foreign telecommunications service providers;
XIV – forwarding, for publication in Anatel’s Library, a copy of the agreements and contracts related to the provision of the
services hereby granted, involving waiver or transfer of revenues, in amounts higher than three million reais (R$ 3,000,000.00) per year;
XV – freely disclosing, directly or by means of third parties, the access code of its subscribers and other subscribers to the Switched Fixed Telephony Service providers, in public or private system,
in the concession area, excluding those who expressly require the omission of their personal data;
XVI – supplying,
within reasonable time limits and prices and on non-discriminatory basis, the list of its subscribers to whomever intends to disclose it;
XVII – strictly respecting the duty of secrecy and confidentiality of telecommunications, subject to legal and contractual provisions;
XVIII – respecting the subscriber’s privacy in relation to bill invoices and all personal information related thereto;
XIX – meeting, at its own account, pursuant to Clause 8.2. of this Agreement, all universalization targets expressly
stated in this Agreement;
XX – implementing service expansion and universalization projects to be determined by Anatel,
according to defined refund levels, time limits and implementation conditions, subject to the provisions in Clause 8.3;
XXI
– previously submitting to Anatel any and all intended amendments to its bylaws in connection with the spin-off, merger, change, take-over, as well as the transfer of control or change to capital stock;
XXII – respecting all rights entitled to other telecommunications service providers, refraining from any inequitable behavior or any
measure to prevent the latter’s activities;
XXIII – using, whenever required by regulation, any equipment with
certification issued or approved by Anatel;
XXIV – complying with the technical rules and standards in force in Brazil,
refraining from any inequitable measure in relation to assets and equipment produced in the Country;
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XXV – making available, to civil defense authorities, agents, and any institutions
providing Emergency Public Services, all requested means, systems and features to support or help affected populations in the event of public catastrophes;
XXVI – serving, with priority, the President of the Republic, protocol representatives, cortège and supporting staff, as well as foreign Chiefs of State, upon any official visits or moves
around the country, by providing all the means required for the proper communication of these authorities, subject to the regulation issued by Anatel;
XXVII – paying all inspection and license fees related to its facilities, pursuant to applicable regulation;
XXVIII – paying all amounts related to public prices, especially for the right to use scarce resources;
XXIX – publishing, on an annual basis, irrespective of the corporate legal system to which it is subject, the balance sheet and financial statements computed at the end of each fiscal year, subject
to provisions in legislation in force and regulation issued by Anatel;
XXX – complying with the rules prevailing in the
country related to the use of foreign labor force, including those for higher qualified positions;
XXXI – indemnifying
users, subject to applicable regulation, for any damages effectively arising from the failure to provide the service required based on the continuity parameters and universalization targets set forth in this Agreement;
XXXII – curing any damages caused by breach of the users’ rights;
XXXIII – refraining from having expenses on management service agreements with foreign entities, including technical assistance, in
amounts higher than one-tenth of one percent (0.1%) per year, in relation to the annual revenues of the Switched Telecommunications Services, until the end of the concession;
XXXIV – complying with any agreements entered into with Brazil and other countries and international bodies, as set forth by Anatel;
XXXV – making available at least six (6) maturity dates, for the user to choose from, in the service bill invoice;
XXXVI – promptly serving all users’ requests recorded in the Anatel’s Service Center, responding them in writing;
XXXVII – supplying data, information, reports and accounting records whenever requested by Anatel, within the stated time
limit, under the penalty of incurring the sanctions set forth in this Agreement; and
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XXXVIII – submitting to Anatel all contracts, agreements or adjustments entered into by
the Concessionaire and its controlling parties, direct or indirect, or affiliates, especially those addressing the administration, management, engineering, accounting, advisory, purchasing, supplies, constructions, loans, sales of shares, goods, as
well as any agreements executed with:
a) individuals or legal entities which, together with the Concessionaire, are part,
directly or indirectly, of the same controlled company; and
b) individuals or legal entities with directors or administrators
in common from the Concessionaire.
Paragraph 1
The decisions related to item XXXIII of this Clause in service
provision and technical assistance agreements, between the Concessionaire and third parties related to controlling shareholders, shall be made at extraordinary shareholders’ meetings, and the Concessionaire shall state in its bylaws that
preferred shares shall be entitled to vote in these decisions, without prejudice to the provisions in article 115, paragraph 1, of Law No. 6,404, of December 15, 1976, as amended by Law No. 10,303, of October 31, 2001.
Paragraph 2
In the event of any conflicts between the Concessionaire and other telecommunications services
providers with respect to the fixation of fair and reasonable values, Anatel may, based on an injunction, determine such amounts, deadlines and any other elements fundamental to the effectiveness of the injunction decision.
Clause 16.2.
Without prejudice to the other provisions included herein and the guarantees ensured by force of law, the
Concessionaire has the following rights:
I – exploiting the services granted within its business strategy, by freely
defining its investments, subject to the regulation issued by Anatel and the provisions in this Agreement;
II –
appointing a representative to monitor Anatel’s inspection activity, except in those cases when the previous summons or the on-site monitoring are incompatible with the nature of the determination, or when confidentiality is required to ensure
the effectiveness thereof; the Concessionaire is ensured access to the corresponding report upon completion of the diligence.
III – suspending or failing to serve the service provision request from any subscriber who is in default with its contractual
obligations with the Concessionaire, pursuant to applicable regulation;
IV – requesting the convening of an arbitration
procedure in the events and pursuant to the provisions of Chapter XXXIII hereof;
V – having the financial conditions to
exploit services preserved against any changes giving rise to the unjust enrichment of the Federal Government or users, pursuant to the provisions in Chapter XIII;
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VI – requesting the review of the tariffs applicable to the service hereby granted,
pursuant to the provisions in this Agreement;
VII – requesting from Anatel the confidentiality of information gathered
during the inspection activity, pursuant to the provisions in this Agreement;
VIII – employing, during the carrying out
of services, any third party’s equipment and infrastructure, subject to Clause 22.1 hereof; and
IX – contracting,
with third parties, the development of activities inherent in, accessory or supplementary to the service, as well as the implementation of associated projects.
Clause 16.3.
While this Agreement is in force, the Concessionaire shall be the sole responsible, before third parties, for the acts performed by its staff, assigns and contractors, during the
provision of the Switched Fixed Telephony Services, as well as for the use of equipment, facilities or networks, and the Federal Government and Anatel shall be held harmless from any related claims and/or indemnities.
Clause 16.4.
The Concessionaire may not place any obstacles to public interest works, whatever their nature, whenever the removal
of facilities or telephone networks is required to enable any direct or indirect intervention by any Public Administration body or entity.
Clause 16.5.
The Concessionaire shall directly negotiate with each Municipal Authorities of the service exploitation areas, as well as with other public service concessionaires, the conditions for
installation of poles and crossheads for supporting its aerial lines and cables, as well as any underground ducts and drain pipes designed for passage of cables under streets and public places.
Paragraph 1
The Concessionaire shall make arrangements with the holders of public or private assets above and under which it
has to give passage to ducts or drain pipes or install supports for placement of ducts or drain pipes in order to obtain their respective consent or right-of-way for such purposes.
Paragraph 2
The Concessionaire shall make, with the respective municipal authorities, the arrangements needed to establish
conditions to overcome any interferences on the network required for providing the service, including those related to tree cutting and pruning.
Paragraph 3
All constructions, facilities and use of equipment for the service provision shall be the entire responsibility of the Concessionaire, at its own account and risk, and it is
expressly understood that the Concessionaire shall be responsible for the relationship with federal, state or municipal bodies liable for usage of soil, buildings and environmental control.
Paragraph 4
Any changes to costs, arising from the relationships with municipal authorities causing imbalance of the
Concessionaire’s financial position shall give rise to tariff reviews, pursuant to this Agreement.
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Clause 16.6.
The Concessionaire may use any poles, ducts, canals and right-of-ways
belonging or controlled by other telecommunications or public service providers, subject to applicable regulation.
Sole
paragraph.
The Concessionaire shall make available to other telecommunications service providers, classified by Anatel as of collective interest, its proprietary means or the means it controls, referred to in the preamble to this Clause.
Clause 16.7.
The Concessionaire shall provide assistance to users during the entire term of this concession, in the
following forms, pursuant to applicable regulation:
I – information and service center to be accessed by users free of
charge, twenty-four (24) hours a day and seven (7) days a week, capable of receiving and processing requests and complaints submitted by users;
II – personal attention that allows users to have a person-to-person interaction concerning the provision of STFC; and
III – any other means of distance communication.
Paragraph 1
The
Concessionaire shall make available, in a clear and objective manner, to all users:
I – the access code to its user
information and service center, as well as access information to other means of distance communication, which must be included in the service agreement, the bill invoice, the Free Mandatory Telephone Directory (
Lista Telefônica
Obrigatória e Gratuita - LTOG
), the Concessionaire’s website, and in all the printed documents and materials submitted at the moment of contracting the service and during its duration; and
II – the addresses of the customer service centers on its website and through the user information and service center.
Paragraph 2
All requests or complaints forwarded by users by any means shall receive a sequential order number, which shall
be communicated to users at the beginning of service to enable them to follow its development, pursuant to applicable regulation.
Paragraph 3
The user shall be informed by the Concessionaire, within the legal and regulatory timeframes, as to the measures adopted in regard to his or her request or complaint.
Paragraph 4
In the event it identifies the users’ difficulty to access the user information and service center, Anatel
may require the Concessionaire to expand the available means of access, under penalty of deeming that the Concessionaire failed to meet the obligation set forth in this Clause.
Clause 16.8.
Upon contracting the services and acquiring equipment and materials related to the services subject hereto, the
Concessionaire shall agree to take into account any bids from independent, including Brazilian, suppliers, and base its decision, with
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respect to the several submitted bids, on meeting the objective price and delivery criteria and technical specifications set forth in the applicable regulation.
Paragraph 1
In the event of equal bids, the Concessionaire shall agree to use, as a decision criterion, the preference to
services offered by companies located in the country, equipment, software and materials produced in the country and, among which, those with Brazilian technology.
Paragraph 2
The equivalence referred to in this Clause shall be determined, when, on a cumulative basis:
I – the Brazilian price is equal to or lower than the imported price, placed in the Brazilian territory, including any taxes levied;
II – the delivery period is consistent with the service requirements; and
III – the technical specifications defined in the applicable regulation are met and have certification issued or accepted by Anatel,
if applicable.
Paragraph 3
Services are construed as those related to the research and development, planning,
project, physical implementation and installation, operation, maintenance, as well as the acquisition of software, supervision and evaluation tests of the telecommunications systems.
Paragraph 4
The Concessionaire shall make available, on a quarterly basis, by means of electronic systems to be used exclusively
by Anatel, the list of goods and services acquired that are directly related to the offer of telecommunications services to the Concessionaire, including at least the following information:
I – The goods manufacturer or service provider;
II – A general description of the goods or service;
III – the value of
the goods or service;
IV- whether the goods are imported or manufactured in the Country;
V – Whether the goods have a local technology certificate, pursuant to the rules issued by the Ministry of Science and Technology or
another entity designated for this purpose; and
VI – The total consumption in the period, breaking down the values of
goods and services according to the criteria set forth in items IV and V.
Clause 16.9.
Except for the changes subject
to Anatel’s prior approval, the Concessionaire shall maintain the commitments of conformity of routes in optical fiber cables stated in Attachment 3 – Optical Routes, which is part of this Agreement.
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Sole paragraph.
The deactivation of routes in optical fiber cables shall depend on
Anatel’s prior approval.
Clause 16.10.
The payment or transfer of amounts due to other telecommunications service
providers shall be the Concessionaire’s obligation, pursuant to applicable regulation, and any non-payment or unreasonable withholding shall be characterized as an obstacle to competition, which will subject the Concessionaire to the sanctions
set forth in Clause 26.1.
Clause 16.11.
Upon request, the Concessionaire shall make available, to collective interest
telecommunications service providers with which it has network interconnections, any billing, collection, service and payment services, under equal, fair and reasonable conditions, pursuant to applicable regulation and applicable tax legislation.
Sole paragraph.
The services referred to in this Clause shall be implemented up to thirty (30) days after its
request, irrespective of the completion of negotiations between the parties or possible requests for settlement of conflicts submitted to Anatel, subject to the provisions in paragraph 2 of Clause 16.1.
Clause 16.12.
The Concessionaire shall ensure to any other collective interest telecommunications service provider the
interconnection with its own network, subject to specific regulation and the rules of this Agreement.
Sole paragraph.
In the event the Concessionaire fails to conclude, within the regulatory time limits, the interconnection agreement and fails to objectively prove the existence of any technical obstacle, Anatel shall establish, based on an injunction, a time
limit for the interconnection implementation, irrespective of the completion of business negotiations or of any possible requests for arbitration submitted to Anatel.
Clause 16.13.
The Concessionaire shall agree to provide the collective interest telecommunications service providers with the resources required for interconnection under the industrial
exploitation format, pursuant to applicable regulation.
Sole paragraph.
In the event the Concessionaire fails to
provide the resources within the regulatory time limits and to objectively prove the inexistence of service capacity, Anatel shall cautiously establish the conditions for the request to be met, including, if required, the values to be charged.
Clause 16.14.
The Concessionaire shall agree to provide the resources required for implementation of the
telecommunications networks, of collective interest service providers under industrial exploitation format, pursuant to applicable regulation.
Paragraph 1
In the event the Concessionaire fails to provide the resources within sixty (60) days counted from the request, and fails to objectively prove the inexistence of service
capacity, Anatel shall establish, based on an injunction, the conditions for the request to be met, including, if required, the values to be charged.
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Paragraph 2
The service agreement date between the user and the service provider
shall define the chronological order the Concessionaire has to follow to meet the requests for resources.
Paragraph
3
In the event of multiple requests for the same user, the Concessionaire shall agree to provide the requested resources by following the chronological order of requests from the service providers.
Clause 16.15.
The Concessionaire shall agree to comply with the General Competition Targets Plan and implement the resale of the
service subject to this concession, pursuant to applicable regulation.
Chapter XVII - Anatel’s Obligations and Prerogatives
Clause 17.1.
In addition to other prerogatives inherent in its role as a regulating body and other obligations
arising from this Agreement, Anatel shall be responsible for:
I – following up and inspecting the service provision and
the safekeeping of reversible assets, aiming at meeting the rules, specifications and instructions set forth in this Agreements and attachments hereto;
II – carrying out the inspections aiming at checking the adequacy of facilities and equipment, requiring any needed corrections, repairs, removals, reconstructions or replacements, to the
Concessionaire’s expense;
III – regulating, on an ongoing basis, the provision of the service granted;
IV – interfering in the carrying out of the services when required, in order to ensure its regularity and the full compliance with
this Agreement and any applicable legal rules;
V – applying the penalties set forth in the service regulation and,
specifically, in this Agreement;
VI – resolving on any Alternative National Long-Distance Services Plans submitted by the
Concessionaire;
VII – fixing, authorizing the adjustment and reviewing tariffs, under the terms and pursuant to this
Agreement;
VIII – operating within the scope set forth in this Agreement in order to prevent the unjust enrichment of the
parties, pursuant to this Agreement;
IX – ensuring the good quality of the service and responding to the requests and
complaints of users, informing them of the measures taken;
X – declaring the end of the concession in the events set
forth in this Agreement;
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XI – ensuring the interconnection guarantee, by settling any possible controversies
arising between the Concessionaire and other service providers;
XII – ensuring the compliance with the universalization
targets set forth in this Agreement, and with any targets to be established in any subsequent Targets Plans;
XIII –
following, on an ongoing basis, the relationship between the Concessionaire and other telecommunications service providers, by settling any conflicts and establishing, based on an injunction, values, time limits and any other conditions fundamental
to the effectiveness of the injunction decision.
XIV – prohibiting any Concessionaire’s behavior contrary to the
competition system, subject to the legal jurisdiction of the Administrative Economic Defense Council (CADE);
XV – upon
the Concessionaire’s request, proposing to the President of the Republic, through intermediation of the Ministry of Communications, the declaration of public interest for purposes of expropriation or institution of administrative easement of
any assets required for the implementation or maintenance of the service subject to this Agreement;
XVI – exercising the
inspection activity over the service, pursuant to the provisions in this Agreement;
XVII – collecting any taxes related
to FISTEL, FUST and other fees to be created, which collection responsibility lies with Anatel, by adopting any measures set forth in legislation in force;
XVIII – ordering the Concessionaire to adopt any arrangements intended to protect the public interest or ensure the fruition of service, subject to provisions in regulation and in this Agreement;
XIX – ordering the Concessionaire to compensate users for any noncompliance with the obligations in this Agreement and
regulation;
XX – ordering the intervention in the Concessionaire in the events set forth in article 110 of Law
No. 9,472 of 1997 and in this Agreement;
XXI – collecting any amounts related to public prices, especially related
to the right to use scarce resources;
XXII – determining any changes or the rescission of contracts, agreements or
amendments entered into between the Concessionaire and its controlling shareholders, direct or indirect, or affiliates, especially those addressing the administration, management, engineering, accounting, advisory, purchasing, supplies,
constructions, loans, sales of shares, goods, in the event they are contrary to legislation, regulations, the economic order or the public interest; and
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XXIII – determining the cancellation of the sale operation conducted or the replacement
of the asset sold by the Concessionaire with an equivalent one, as well as amendments or rescission of contracts, agreements or adjustments executed between the Concessionaire and a third party, when they are contrary to legislation, rules,
regulations, the economic order or the public interest.
Chapter XVIII – The Concessionaire
Clause 18.1.
The Concessionaire is a company incorporated according to Brazilian laws, as a corporation, and its exclusive purpose
is the exploitation of the service subject to this concession, except for the services stated in article 207, paragraph 3, of Law No. 9,472 of 1997.
Sole paragraph.
If any Concessionaire’s statutory change is approved, the documents formalizing such change shall be forwarded to Anatel for filing, and shall become an integral part of this
Agreement, pursuant to applicable regulation.
Clause 18.2.
The Concessionaire and its controlling parties shall agree
to keep, during at least the full concession period, all conditions for service provision and capacity existing at the time this Agreement came into effect.
Clause 18.3.
The Concessionaire and its controlling parties shall agree to ensure, during the concession period, the effective existence and operation, in the national territory, of the centers for
resolution and implementation of strategic, managerial, logistics, commercial, operating and technical decisions involved in the enforcement of this Agreement, including causing this obligation to impact the composition and decision-making
procedures of its management bodies.
Sole paragraph.
The Concessionaire shall maintain, in its bylaws, during the
validity period of this Agreement, the provisions ensuring the compliance with the preamble to this Clause.
Chapter XIX – Transfer of
the Concessionaire’s Concession and Control
Clause 19.1.
The transfer of the Concessionaire’s concession
or control, either direct or indirect, may be authorized by Anatel, subject to the General Licensing Plan and Law No. 9,472 of 1997, whenever:
I – the assignee meets all requirements defined in articles 97 and 98 of Law No. 9,472 of 1997; and
II – to the extent that it does not jeopardize competition or risk the enforcement of the Agreement and the general rules of protection to the economic order.
Sole paragraph.
The noncompliance with any provision in this Clause shall give rise to the forfeiture of this concession.
Clause 19.2.
Any Concessionaire’s shares, which transfer does not change its control, may be freely pledged in
guarantee.
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Sole paragraph.
In the event of shares pledged in guarantee giving rise to
encumbrances of the Concessionaire’s equity, provisions submitting the creditors, in the event of execution, to the rules stated in this Chapter shall be set forth in the Financing Agreements.
Chapter XX - Inspection Activities
Clause 20.1.
Anatel shall inspect the service hereby granted in order to ensure the compliance with the universalization and continuity obligations inherent in the public system of its provision,
as well as care for the compliance with the targets and commitments stated in this Agreement.
Paragraph 1
The
inspection to be exercised by Anatel shall comprise the inspection and follow-up of activities, equipment, facilities, agreements and the Concessionaire’s economic and financial situation, either by means of direct operation of its inspection
agents or by formal request, implying broad access to all Concessionaire’s and third parties’ data and information, which shall be timely provided, as requested, pursuant to the provisions in this Agreement.
Paragraph 2
Any information gathered during the inspection shall be published in the Library, except for those deemed as
confidential by Anatel, upon the Concessionaire’s request.
Paragraph 3
Any information to be deemed as
confidential, in accordance with the foregoing paragraph, shall be only used in the procedures related to this Agreement, and Anatel and others appointed by Anatel shall be responsible for any disclosure, either broad or restricted, of such
information outside the scope of utilization.
Paragraph 4
Anatel’s inspection shall also comprise the
follow-up and control over the Concessionaire’s actions in the technical, accounting, commercial and economic and financial areas, and it may establish guidelines and procedures required to carry out the inspection, as well as suspend any and
all activities inconsistent with the requirements of universalization, quality, efficiency, security and continuity of the service.
Paragraph 5
The Concessionaire’s accountability shall be submitted separately for the STFC mode subject to this Agreement and follow the chart of accounts established pursuant to
applicable regulation, as well as record and calculate, separately, the investments and costs of its several network components.
Paragraph 6
The Concessionaire shall agree to provide relevant information to Anatel, pursuant to applicable regulation, and among them:
I - economic, financial and accounting information, including information on the balance sheet, statements of income, indebtedness, cash
flow and added value, among others;
II – commercial information, including net and gross revenues, total number of
minutes and calls charged with tariffs, and number of default subscribers by service plan;
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III – technical operating information, including installed capacity, external plant,
switch and transmission ports, plans to introduce new technologies by service and sector; and
IV – other information,
such as the number of the concessionaire’s employees and employees contracted by activity.
Paragraph
7
Anatel’s inspection shall not be construed as reducing or exempting the Company’s responsibilities with respect to the adequacy of its works and facilities, the accuracy and lawfulness of its accounting records and its financial
and commercial operations.
Paragraph 8
It is the Concessionaire’s duty to provide any information within the
timeframe defined by Anatel.
Clause 20.2.
By intermediation of the appointed representative, the Concessionaire may
follow up Anatel’s inspection activities, except in those cases when the previous summons or the on-site monitoring are incompatible with the nature of the determination, or when confidentiality is required to ensure the effectiveness thereof,
and may not bar or prevent the inspection, under the penalty of incurring the penalties set forth in this Agreement.
Chapter XXI –
Concessionaire’s Accountability
Clause 21.1.
Pursuant to applicable regulation and in the manner defined by
Anatel, the Concessionaire shall forward to Anatel, from time to time, information and detailed and statistical reports on the STFC mode subject to this Agreement, among which:
I – indicators of expansion, comprehensiveness and occupation of the telephony network;
II – technical data related to the contracting and usage of the service subject to this concession, broken down by type of service plan contracted, tariff structure item, type of communication and
usage time;
III – data related to the usage of the Concessionaire’s networks and resources, broken down by type of
service providers involved, type of communication, type and comprehensiveness of the resource used, usage time and other applicable criteria;
IV – technical data related to items of additional, supplementary and accessory revenues, pursuant to this Agreement;
V – the statement of income detailing revenues and respective expenses related to the items mentioned in items I, II, III and IV of this Clause;
VI – the monthly standard balance sheet, the quarterly information (ITR), the financial statements for each fiscal year and other
information and documents related to each fiscal year, duly audited;
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VII – data related to financial operations carried out by the Concessionaire, including
those related to the issue of debt securities;
VIII – data which enables the characterization of the technological stage
of the equipment used, as well as the operation level of the plant; and
IX – data related to the quantity and
qualification level of the human resources used, either the concessionaire’s or from third parties’.
Paragraph
1
The provision of data mentioned in this Clause shall not exempt or reduce the Concessionaire’s responsibility as to the adequacy, accuracy and lawfulness of its accounting records, and financial and commercial operations.
Paragraph 2
The noncompliance with the requests, recommendations and determinations contained in this Clause shall subject
the Concessionaire to the application of the sanctions set forth in this Agreement.
Clause 21.2.
The provision of the
requested information shall, whenever possible, become ongoing and automated processes for information provision, as suggested by the Concessionaire, and be either adopted or not, at Anatel’s discretion.
Chapter XXII – Concession-Related Assets
Clause 22.1.
All assets belonging to the Concessionaire’s equity, as well as to the Concessionaire’s controlling party, subsidiary, affiliate or third parties, and which are fundamental
to the provision of the service hereby granted, especially those qualified as such in Attachment 1 hereto – Qualification of Reversible Assets in the Provision of National Long-Distance Switched Fixed Telephony Services, shall be an integral
part of this concession and be related thereto.
Paragraph 1
The list of concession-related assets also includes
authorizations to use radiofrequencies granted and, if possible, the right to use orbital positions, subject to the provisions in articles 48 and 161 of Law No. 9,472 of 1997, and also the provisions in Clause 4.1. hereof.
Paragraph 2
The activities and processes required to the provision of STFC in the public system are an integral part of the
concession, aiming to ensure business continuity, taking into consideration that these are essential items and that their provision is constantly subject to technological changes.
Paragraph 3
In relation to the concession-related assets, the Concessionary may only directly employ, in the provision of the
service hereby granted, any non-proprietary equipment, infrastructure, software or any other asset upon the express prior consent by Anatel, which may waive such requirement in the cases and events set forth in regulation.
Paragraph 4
In the event of any risk to the continuity of services or prevention from the reversal of the concession-related
items, Anatel may refuse authorization for use of third parties’ assets or then demand that the respective agreement includes a clause by which the
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owner agrees, in the event of the end of the concession, to keep the agreements and subrogate Anatel in the rights arising therefrom.
Paragraph 5
Pursuant to applicable regulation, the Concessionaire shall agree to submit a list including the
concession-related assets on a yearly basis, according to definition of Clause 22.1.
Paragraph 6
Applicable
regulation shall address the identification and control over reversible assets, especially with respect to sale, encumbrance or replacement of assets, which shall depend on Anatel’s prior approval, and these assets shall be clearly identified
in the list submitted by the Concessionaire on a yearly basis.
Paragraph 7
Any assets linked to the provision of
services and with their usage shared by the Concessionaire shall comprise the list submitted by the Concessionaire on a yearly basis.
Clause 22.2.
The Concessionaire shall agree to submit to Anatel, on a quarterly basis, from the eighteenth (18th) year of validity of this Agreement:
I – a list including all assets belonging to its equity and which are fundamental to the provision of the service hereby granted,
especially those qualified as reversible assets of the Provision of Switched Fixed Telephony Services in the Long-Distance Mode;
II – a report on the inventory of parts and replacement and expansion parts;
III – a financial report, including the indebtedness level and meeting of obligations with third parties; and
IV – a report including information on human resources and staff qualification.
Chapter XXIII – Reversal of Assets
Clause 23.1.
Upon the end of the concession, all concession-related assets, pursuant to Chapter XXII, shall automatically reverse to Anatel, and the Concessionaire shall remain with the right to
the indemnities set forth in legislation and in this Agreement.
Sole paragraph.
Up to one hundred eighty
(180) days after the end of the concession, an inspection of the concession-related assets shall be carried out and a Statement of Return and Reversal of Assets shall be drawn up including a statement of the conservation status of such assets,
and the Concessionaire’s representative(s) shall have the option to monitor such inspection.
Clause 23.2.
The
Concessionaire shall agree to deliver the reversible assets in perfect operation, usage and maintenance conditions, without prejudice to the normal wear and tear resulting from its usage.
Sole paragraph.
The reversible assets shall be transferred to Anatel free from any liens or charges, subject to the event of
paragraph 2 of the Clause below.
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Clause 23.3.
The reversal of assets addressed in this Chapter, at the end of the
contractual period, shall be carried out without indemnity, except for the provisions in this Clause.
Paragraph
1
The Concessionaire shall be indemnified only in the event there shall be, at the end of the concession, any assets not fully repaid, which acquisition had been previously authorized by Anatel to ensure the continuity and updating of the
service provided.
Paragraph 2
Alternatively or complementarily to the indemnity referred to in the foregoing
paragraph, Anatel may accept the transfer of assets which have been pledged as guarantee of its own financing, subrogating the financial installment still unpaid.
Clause 23.4.
At the end of the concession, Anatel shall evaluate the assets referred to in Clause 22.1, and may refuse the reversal of assets it deems as dispensable or unserviceable for
application in the exploitation of the service, and the Concessionaire shall be entitled to the adversarial right, including by preparing and submitting, at its expense, any appraisal reports or studies supporting the need for reversal.
Sole paragraph.
In the event the Concessionaire disagrees with Anatel’s decision with respect to the foregoing in this
Clause, it may request the application of the resource for settlement of disputes provided for in this Agreement.
Chapter XXIV –
Insurance Plan
Clause 24.1.
During the whole validity period of this concession, the Concessionaire shall have,
with an insurance company of a size consistent with the capital to be insured, registered with the sector regulatory bodies, the following insurance policies required for ensuring the effective and comprehensive coverage of risks inherent in the
development of all activities stated in this Agreement:
I – “all risks” type insurance for material damages,
covering the loss, destruction or damages to any or all concession-related assets, and this insurance shall include all coverage required in accordance with international standards;
II – insurance to preserve the economic conditions for the ongoing exploitation of services, by covering at least the operating costs
against any changes in the Concessionaire’s revenues arising from claims or changes in the Agreement exploitation conditions which are not covered by insurance against material damages, provided that the adoption of this type of insurance be
accepted by Brazilian legislation and expressly authorized by the Brazilian reinsurance authority, the Instituto de Resseguros do Brasil – IRB, or a similar body; and
III – surety bonds ensuring the compliance with obligations related to the quality and universalization set forth in this Agreement (Performance Bond, credit letter and amount pledged as guarantee)
in the amount corresponding to ten percent (10%) of the investments estimated at each year for compliance with the targets set forth herein.
34
Paragraph 1
The Concessionaire shall, upon renewal of the insurance policies,
submit a declaration of the Insurance Company having the obligation to report to the Concessionaire and Anatel, in writing, with at least thirty (30) days in advance, any facts which may give rise to the total or partial cancellation of the
contracted insurance policies, reduction in coverage, increase in deductible amounts or reduction in insured amounts.
Paragraph 2
The Concessionaire shall also, upon renewal of the insurance policies, submit an express declaration by the Insurance
Company that it is fully aware of the Concession Agreement and of Anatel’s regulations, including in regard to the Concessionaire’s limitations and rights.
Paragraph 3
In the event of the Concessionaire’s noncompliance with the obligation to keep the insurance policies in force, Anatel, irrespective of its right to order the intervention or
forfeiture of this concession, may contract and directly pay the respective premiums, and the Concessionaire shall bear the related costs.
Paragraph 4
The Concessionaire shall submit a certificate issued by the insurance company(ies) confirming the settlement of the premium(s) related to the policy(ies) within sixty (60) days of
their settlement.
Paragraph 5
Any insurance policies required to guarantee the effective and comprehensive
coverage over risks inherent in the development of all activities stated in this Agreement shall be in force submitted to Anatel, in full, within thirty (30) days of their issuance.
Paragraph 6
The Concessionaire undertakes to submit, by the date of expiration of each policy, a declaration of the insurance
company(ies) stating that said policy is being renewed.
Paragraph 7
Anatel may change the coverage or submission
periods of the insurance policies referred to in this Clause, in order to adjust such requirements to the regulation issued by the Superintendence of Private Insurance (SUSEP), as well as upon the issue of any rules preventing the contracting of
insurance policies referred herein or the inexistence of conditions for a broad and competitive market to enable its contracting at reasonable costs.
Paragraph 8
Annually, until the end of November, the Concessionaire shall submit an estimate for the following year of the amount of investments required to comply with the obligations herein,
which will subsidize the contracting of the guarantee provided for in item III of this Clause.
Chapter XXV – Interconnection
Clause 25.1.
The Concessionaire shall agree to allow, facilitate, make available and carry out the interconnection,
to the network it operates, of networks of other collective interest telecommunications service providers, in public or private system, and comply with and cause the compliance with the rules and regulations issued by Anatel accordingly.
Clause 25.2.
As of a date to be determined by Anatel, new values will be adopted for the network usage fee for long-distance
interconnections (TU-RIU), which consider the long-
35
term cost model, set forth in applicable regulation and the terms and the provisions in Clause 13.1.
Paragraph 1
The maximum values of the network usage fee for long-distance interconnections (TU-RIU) shall be limited to the output of multiplier M by the tariff of step 4 of the national
long-distance service, subject to the time modulation and stated in Attachment 2 to this Agreement and in applicable regulation; from January 1, 2006 to December 31, 2007, M will be equal to zero point three (0.3).
Paragraph 2
In the event the application of the provision in the paragraph above gives rise to an increase in the TU-RL
value, this value may only be charged from the next adjustment in the tariffs of step 4 of the LDN service.
Clause 25.3.
The Concessionaire shall have the same rights and comply with the same interconnection conditions as other collective interest telecommunications service providers.
Sole paragraph.
The Concessionaire shall make available, for the interconnection, the network elements with the highest possible technical breakdown level, subject to Anatel’s regulation.
Clause 25.4.
In the event of unreasonable refusal for interconnection, and without prejudice to other measures, Anatel
may order the intervention in the Concessionaire.
Sole paragraph.
The unreasonable refusal for interconnection is
characterized by:
I – the failure to submit the interconnection agreement within the time limits established by
regulation;
II – the failure to provide the interconnection within the time limits established by regulation;
III – the noncompliance with any injunction involving the interconnection provision, determined by Anatel.
Clause 25.5.
The unreasonable refusal for interconnection shall be deemed as a serious breach, and the Concessionaire shall be
subject to the sanctions set forth in Chapter XXVI hereof, without prejudice to other measures to be adopted by Anatel.
Sole paragraph.
In the event the unreasonable refusal for interconnection involves bad faith, the provision in article 177 of Law
No. 9,472 of 1997 shall also apply.
Chapter XXVI – Sanctions
Clause 26.1.
Upon enforcement of this Agreement, the Concessionaire shall agree to be subject to the following sanctions, which
will be applied based on Anatel’s well-founded decision, and have its right to defense guaranteed, under the provisions of its Bylaws and without prejudice to other penalties set forth in regulation:
36
I – for any breach of the provisions herein resulting in the failure to meet the
universalization targets: fine of up to fifty million reais (R$50,000,000.00);
II – for ay act or omission contrary to
the provisions stated in this Agreement, or any other normative ruling giving rise to losses to competition in the telecommunications sector: fine of up to fifty million reais (R$50,000,000.00);
III – for breach of any contractual provisions giving rise to noncompliance with quality targets and parameters in service provision:
fine of up to forty million reais (R$40,000,000.00);
IV – for any other act or omission not stated in the items above
giving rise to breach of user’s rights defined in this Agreement or result in losses to the user: fine of up to thirty million reais (R$30,000,000.00);
V – for any act or omission which breaches the provision in Clause 16.8 of this Agreement, with respect to the contracting of services and acquisition of equipment and materials produced in the
country: fine of up to thirty million reais (R$30,000,000.00);
VI – for any act or omission giving rise to obstacles or
difficulties in the exercise of Anatel’s inspection activity set forth in this Agreement: fine of up to twenty million reais (R$20,000,000.00);
VII – for any act or omission giving rise to noncompliance with Anatel’s determination: fine of up to twenty million reais (R$20,000,000.00);
VIII – for any act, omission or negligence which poses risk to the safety of facilities: fine of up to fifteen million reais
(R$15,000,000.00);
IX – for any act or omission giving rise to damages or pose risk to any assets and equipment related
to the concession: fine of up to ten million reais (R$10,000,000.00); and
X – for noncompliance with any obligation
expressly set forth herein, except for those stated in the items above, which sanctions are already defined therein: fine of up to ten million reais (R$10,000,000.00).
Paragraph 1
The breach stated in item I of this Clause shall be characterized when the Concessionaire fails to meet its obligations, within the time limits set forth in this Agreement, with
respect to the service expansion, expansion of service provision, by means of public usage telephones and services to locations, pursuant to the General Plan on Universal Service, and shall be applied taking into account the following factors in
addition to the general principles stated in this Chapter:
a) the difference between the implementation stage noted and the
target defined in the Agreement;
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b) the possible recovery of the implementation schedule to the Concessionaire’s
expense;
c) the damage for the policy reflected in the General Plan on Universal Service;
d) any damages to the direct beneficiaries of the unachieved targets; and
e) any possible technical or economic circumstances that may mitigate the Concessionaire’s responsibility without eliminating it.
Paragraph 2
The breach stated in item II above shall have its seriousness defined solely in view of the general
criteria stated in the specific regulations, and shall be characterized by the Concessionaire’s behavior that, directly or indirectly, may give rise to losses to competition in the sector, especially:
a) placing any obstacle or difficulty to the option for another service provider or national or international long-distance service;
b) refusal to provide interconnection to any telecommunications service provider;
c) placing any obstacle or difficulty to the activity carried out by added value service providers;
d) refusal or delay in extending, under equal conditions, the co-billing to other collective interest providers, characterized by its
failure to implement it within up to thirty (30) days counted from the related request;
e) unreasonable failure to pay
any amounts due to another telecommunications service provider;
f) refusal or delay in providing, under equal conditions, the
resources needed for the implementation of telecommunications networks, including access network, of collective interest service providers, under industrial exploitation format, characterized by its failure to implement it within up to sixty
(60) days counted from the related request;
g) conditioning the provision of the service or offering advantages in view
of the user’s acquisition of any other service alien to this Agreement;
h) carrying out any telecommunications service
not subject to the concession granted by Anatel in its favor;
i) failure to preserve the quality levels achieved in its own
network with respect to interconnection; and
j) delaying the delivery or providing inadequate information essential to the
activities of other service providers, especially with respect to reference files.
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Paragraph 3
The breach stated in item III of this Clause shall be characterized
by the recurrent provision of the service granted in levels below the quality parameters defined in the General Quality Targets Plan or by the proven breach of the indicators referred to in Chapter VI, and the first one shall be deemed as a serious
breach, especially:
a) the non-allocation of human and material resources required for preservation of minimum quality
standards in the operation or service maintenance;
b) negligence to modernize the network, affecting the service quality;
c) the gathering and forwarding of indicators to Anatel in nonconformity with regulation;
d) the refusal, omission or delay in providing information on quality; and
e) the noncompliance of the duty to maintain the continuity or regularity in provision of service, except in the event of the
circumstances set forth in the sole paragraph of Clause 7.1.
Paragraph 4
The breach stated in the foregoing item IV
shall have its seriousness scale defined in view of the number of users affected and losses caused, and the either committed or omitted, or direct or indirect, breach of any obligation set forth in this Agreement, which does not imply an offense to
universalization and quality duties, but gives rise to breaches of the users’ rights, especially:
a) the refusal to
provide the service granted to any interested party;
b) the noncompliance with the duty to provide information to user;
c) the breach of telecommunications secrecy, outside the legal events, albeit carried out by third parties in the facilities
of responsibility of the Concessionaire;
d) the failure to maintain service centers pursuant in the manner defined in this
Agreement;
e) the billing of tariff or price not in compliance with the rules set forth in this Agreement and regulation;
f) the restriction to the right of exercising free choice among service plans and service providers;
g) the failure to compensate users, pursuant to applicable regulation or as determined by Anatel;
h) the noncompliance with the Agency’s determinations, according to the terms and conditions set forth; and
i) the failure to guarantee the access code portability right, pursuant to applicable regulation.
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Paragraph 5
The sanction set forth in item V above shall be characterized when
the breach of the obligation stated in Clause 16.8 and have its seriousness defined pursuant to applicable regulation.
Paragraph 6
The breach stated in the foregoing item VI shall have its seriousness defined in view of the relevant of the
fiscal activity, which had been prevented, and be characterized by the breach, either committed or omitted, or direct or indirect, carried out by the Concessionaire or its assigns, preventing the inspection activity exercised by Anatel, its assigns,
agents or even by the user, especially:
a) the Concessionaire’s refusal to meet a request for information made by Anatel
with respect to the service granted or any related assets;
b) placing any obstacle to the operation of Anatel’s
inspection agents;
c) failure to comply with any advertising obligations set forth herein or in regulation; and
d) failure to forward or the untimely forwarding of any information, data, report or document, which, by force of regulation or this
Agreement, should have been forwarded to Anatel.
Paragraph 7
The breach stated in item VIII of this Clause shall have
its seriousness defined in view of the proportional risk arisen and be characterized by the Concessionaire’s behavior against the rules set forth in this Agreement and regulation, that breaches the technical safety rules and standards and poses
risk to the facilities related to the service granted, especially:
a) the employment, in the service granted, of any equipment
not certified or approved by Anatel pursuant to applicable regulation;
b) the non-allocation, in service operation and
maintenance, of the human and material resources required for preservation of minimum quality standards; and
c) failure to
adopt any precautions recommended for the service hereby granted.
Paragraph 8
The breach stated in the foregoing
item IX of this Clause shall have its seriousness defined in view of the significance, economic relevance and essence of the involved assets and be characterized by the Concessionaire’s behavior against the provisions in this Agreement or
regulation and which may pose risk to the assets or equipment related to this concession or make it difficult to reverse such assets or equipment, especially in view of:
a) the failure to maintain inventory and records of the assets referred to in Clause 22.1;
b) the employment, directly in the provision of the service subject to this concession, of third parties’ assets without the prior consent by Anatel or without the waiver of such consent;
40
c) the negligence in the preservation of the reversible assets, subject to applicable
regulation; and
d) the failure to provide the information set forth in Clause 22.1.
Paragraph 9
The sanction set forth in the foregoing item X shall be characterized when the breach of the contractual obligation
not stated in the foregoing items is identified, especially:
a) noncompliance with the provisions in item XXX of Clause 16.1;
and
b) refusal or delay in enabling the access, pursuant to applicable regulation, to the information of its subscribers’
list required for purposes of disclosure of telephone directories.
Paragraph 10
The sanction set forth in the
foregoing item VII shall be characterized by the noncompliance with Anatel’s determination, especially with respect to the one aiming at guaranteeing the respect to the users’ rights.
Paragraph 11
The sanction set forth in the foregoing item II has a contractual nature and shall be applied by Anatel, irrespective
of any arrangements to be adopted by CADE.
Clause 26.2.
For application of the contractual fines set forth in this
Chapter, the rules stated in Title VI of Book III of Law No. 9,472 of 1997 and in regulation shall be complied with.
Sole paragraph.
For application of the sanctions set forth in this Chapter, the provisions in Anatel’s Bylaws and in the
applicable regulation shall be taken into account.
Clause 26.3.
The fines set forth in this Chapter shall be applied
without prejudice to the characterization of the intervention events or declaration of forfeiture set forth in this Agreement.
Sole paragraph.
In the event of total or partial failure to carry out the adjustment or of any unreasonable delays longer than one
hundred twenty (120) days to meet the targets set forth in this Agreement, the Concessionaire shall be subject to declaration of forfeiture pursuant to Clause 27.4.
Clause 26.4.
The maximum amounts of the fines set forth in this Chapter are basic for June 1998 and shall be adjusted based on the IGP-DI (general price index – internal availability) rate.
Chapter XXVII – End of Concession
Clause 27.1.
The Concession Agreement shall be deemed as ended in the following events:
I – end of service concession period;
41
II – expropriation, pursuant to article 113 of Law No. 9,472 of 1997;
III – forfeiture, pursuant to article 114 of Law No. 9,472 of 1997, and in this Agreement;
IV – amicable or judicial termination, pursuant to article 115 of Law No. 9,472 of 1997; and
V – annulment.
Paragraph 1
At the end of the concession, Anatel shall be returned the rights and duties related to the provision of the service granted, with the reversal of assets referred to in Clause
23.1, and the Concessionaire shall have the right to any indemnities set forth in legislation and in this Agreement.
Paragraph 2
After the end of the concession, Anatel shall carry out any required investigations, evaluations and settlements
within one hundred eighty (180) days counted from the assumption of the service, except for in the event of end of contractual period, when these arrangements shall be adopted in advance by Anatel.
Paragraph 3
In the event the agreement is ended before the contractual period, without any prejudice to other applicable
measures, Anatel may:
I – occupy temporarily movable and immovable assets and use any staff contracted for the provision
of services, required to its continuity; and
II – keep the agreements entered into by the Concessionaire with third
parties during the terms and under the conditions originally agreed.
Clause 27.2.
The reversal, at the end of the
contractual period, shall be carried out without any indemnity, except for in the event set forth in Clause 23.3.
Clause
27.3.
Pursuant to article 113 of Law No. 9,472 of 1997, expropriation shall be construed as the recovery of the service by Anatel during the concession period, in view of any extraordinary reason of public interest, by means of a specific
authoritative law and preceded by an indemnity payment.
Clause 27.4.
This Agreement may have its forfeiture declared
by means of an act of Anatel’s Steering Committee, preceded by an administrative proceeding which shall guarantee full defense to the Concessionaire, in the following events:
I – transfer of corporate control, spin-off, merger, concessionaire’s change or take-over or decrease of its capital stock
without Anatel’s prior approval;
II – irregular transfer of the Agreement;
III – noncompliance with transfer commitments referred to in Clause 19.1 and article 87 of Law No. 9,472 of 1997;
42
IV – Concessionaire’s bankruptcy or winding-up;
V – failure to meet insurance coverage requirements, in noncompliance with the obligations set forth in Clause 24.1, and in the event
such failure may not, at Anatel’s discretion, be cured by intervention;
VI – upon occurrence, pursuant to article
114, item IV, of Law No. 9,472 of 1997, of any of the events set forth in Clause 28.1 and if, at Anatel’s discretion, the intervention is deemed as inconvenient, mild or unreasonably beneficial to the Concessionaire; and
VII – noncompliance with the universalization targets stated in the General Plan on Universal Service approved by Decree of the
President of the Republic.
Paragraph 1
The intervention shall be deemed as unnecessary when the demand for the
service subject to this concession may be met, upon permission, by other service providers on a regular and immediate basis.
Paragraph 2
The declaration of forfeiture shall not eliminate the application of any proper penalties, pursuant to this
Agreement, in connection with the breaches carried out by the Concessionaire, nor shall it jeopardize the indemnity right defined pursuant to the Chapter below.
Clause 27.5.
The Concessionaire shall be entitled to contractual termination, either amicable or judicial, when, due to action or omission by the Government, the enforcement of the agreement
becomes excessively onerous, pursuant to article 115 of Law No. 9,472 of 1997.
Sole paragraph.
The introduction
or expansion of competition among the several providers of the service subject to this concession shall not be deemed as grounds for contractual termination, and it is certain that the Company, upon assuming this concession, is aware that it will
exercise activities without any market reserve or exclusivity.
Clause 27.6.
The agreement shall be declared null by
Anatel in the event of any incurable and serious irregularity to this Agreement.
Chapter XXVIII – Indemnity
Clause 28.1.
For purposes of calculation any indemnity due to Anatel by the Concessionaire, in the events expressly set forth in
this Agreement, the following shall apply:
I – end of contractual period – there shall be no indemnity, except if
evidenced that the non-payment shall give rise to the Federal Government’s unjust enrichment in view of reversal of assets not yet fully repaid, subject to the provision in Clause 23.3., less the amount of losses caused and fines applied, as
well as, if applicable, any financial obligations not met;
II – expropriation – subject to article 113 of Law
No. 9,472 of 1997, the indemnity, which shall be paid on demand, shall correspond to the amount of
43
assets reversing to the granting power, less depreciation, amount of losses caused and fines applied, as well as, if applicable, any financial obligations not met;
III – forfeiture – irrespective of application of fines and cure of damages arising from default pursuant to this Agreement, the
Concessionaire may only file for indemnity upon evidence of the Federal Government’s unjust enrichment in view of the reversal of assets not yet fully repaid or depreciated, less the amount of losses caused and fines applied, as well as, if
applicable, any financial obligations not met;
IV – amicable or judicial termination – there shall be no indemnity,
except if otherwise fixed in court decision; and
V – annulment – only upon evidence that the Concessionaire has not
contributed to the illegality, there shall be indemnity corresponding only to the effective amounts of assets reversing to the Federal Government, calculated at the annulment declaration date, provided that these assets have not yet been fully
repaid for service exploitation, less the amount of losses caused and fines applied, as well as, if applicable, any financial obligations not met.
Paragraph 1
The temporary amount to be advanced by Anatel due to expropriation shall be calculated pursuant to provision in the specific authoritative law.
Paragraph 2
In the event of forfeiture due to the Concessionaire’s proven negligence, this will also give rise to:
a) withholding of credits arising from the Agreement, including the appropriation of revenues from payments made by service
users;
b) responsibility for any losses caused to the Federal Government and users;
c) application of fines pursuant to this Agreement and legislation in force; and
d) loss of surety bonds set forth in Clause 24.1.
Paragraph 3
Except for expropriation, the indemnity applicable to other events of end of Agreement shall be calculated pursuant to the provisions in this Chapter and carried out in
installments based on the number of months in which the concession would be still in force, and the first installment shall mature after one (1) year from the end of the Agreement.
Paragraph 4
Anatel may transfer to the service provider succeeding the Concessionaire, with respect to the service
exploitation, the encumbrance for payment of respective indemnities, assuming the payment obligation again, in the event the new service provider delays payments over ninety (90) days.
Chapter XXIX – Users’ Council
Clause 29.1.
The
Concessionaire shall organize and keep Users’ Councils with an advisory role, pursuant to applicable regulation.
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Chapter XXX – Environment and Environmental Control
Clause 30.1.
The Concessionaire shall adopt, at its own account and risk, all measures stated in the Brazilian legislation or
regulation, or, in its absence, the best environmental practices, especially in relation to:
I – the usage of ground and
underground;
II – the construction of towers, poles and other supporting structures to fix any electromagnetic radiation
equipment;
III – the human exposure to electric, magnetic and electromagnetic fields, with the compliance with any limits
established in Anatel’s regulation;
IV – the mitigated use of natural resources and energy; and
V – the respect to the historical and cultural heritage and to Indian communities.
Sole paragraph.
The Concessionaire shall submit to the applicable bodies, whenever required, reports on environmental impacts, as
well as make efforts to achieve the respective license, pursuant to applicable legislation.
Chapter XXXI – Intervention
Clause 31.1.
Intervention in the Concessionaire may be ordered by Anatel, at its discretion and in the public
interest, by means of a specific act and motivated by its Steering Committee, pursuant to Book III, Section V, Chapter II, Title II, of Law No. 9,472 of 1997, especially in the following situations:
I – unreasonable service interruption, which shall be construed as interruption to service provision in other events than those set
forth in this Agreement and without submitting any reasons deemed by Anatel as justifications;
II – recurrent
inadequacies or deficiencies in the service provided, characterized by the failure to meet quality parameters set forth in this Agreement and in regulation, even after having a time limit notified by Anatel to regularize the situation;
III – bad management practices posing risk to the continuity of services, especially any practice giving rise to financial imbalance;
IV – serious breaches;
V – noncompliance with universalization targets, which shall be construed as the unreasonable failure to meet the schedule of universalization obligations stated in this Agreement;
VI – unreasonable refusal or delay in providing the interconnection, which shall be construed as the refusal, delay or any hindering
attitudes towards the
45
negotiation or activation to its network, as requested by another service provider, subject to applicable regulation;
VII – breaches of the economic order, in such a way to prevent behaviors harmful to the free, broad and fair competition among service providers; and
VIII – failure to provide accountability to Anatel or placing obstacles to inspection activities which might presume the practice of
any of the events set forth in the foregoing items.
Clause 31.2.
The intervention act shall necessarily define the
period, the reasons, the purposes and the limits, in addition to appoint the intervener.
Sole paragraph.
The
intervention period and limits shall be consistent and proportional to the reasons which gave rise to such act.
Clause
31.3.
The intervention shall be preceded by an administrative proceeding filed by Anatel, and the Concessionaire shall be guaranteed the right to full defense.
Sole paragraph.
When it becomes indispensable, the prompt intervention may be ordered by Anatel, based on an injunction, without the Concessionaire’s previous statement of position, and in
this case the proceeding shall be immediately filed at the date it is ordered and concluded no longer than one hundred eighty (180) days, during which the Concessionaire may exercise its right to full defense.
Clause 31.4.
The intervention order shall not affect the Concessionaire’s normal course of business or its normal operations,
but shall cause the immediate removal of its management.
Clause 31.5.
The intervener’s role may be laid upon an
officer belonging to Anatel’s staff, a specifically appointed person, board of directors or company, and the Concessionaire shall bear the related compensation costs.
Paragraph 1
Anatel may file an appeal against any acts carried out by the intervener.
Paragraph 2
The intervener shall account for and be held liable for any acts he/she carries out.
Paragraph 3
For any sale and disposal of the Concessionaire’s assets, the intervener shall need Anatel’s prior approval.
Clause 31.6.
The intervention shall not be ordered when, at Anatel’s judgment, it is deemed as unnecessary.
Sole paragraph.
The intervention shall be deemed as unnecessary in the events set forth in paragraph 1 of Clause 27.4, as well as
in those set forth in article 114, item IV, of Law No. 9,472 of 1997.
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Chapter XXXII – Expropriations and Administrative Impositions
Clause 32.1.
For purposes of service implementation, provision or modernization, if any expropriation or administrative easement is
required, the related encumbrances shall be the full responsibility of the Concessionaire, and Anatel shall request the President of the Republic, through the Ministry of Communications, to issue a public interest order.
Chapter XXXIII – Arbitration
Clause 33.1.
Any possible conflicts arising in connection with the application and interpretation of the concession rules shall be settled by Anatel, while exercising its role as a regulatory body,
pursuant to articles 8 and 19 of Law No. 9,472 of 1997 and to its Bylaws, and the Concessionaire may resort to the arbitration procedure addressed in this Chapter solely when in disagreement with Anatel’s decision related to the following
issues:
I – breach of the Concessionaire’s right to protect is economic situation, as set forth in Chapter XIII;
II – tariff reviews, as set forth in Chapter XIII; and
III – indemnities due upon the end of this Agreement, including those with respect to reversed assets.
Sole paragraph.
The submission of any issue to arbitration shall not exempt Anatel and the Concessionaire from the obligation to
fully comply with this Agreement or allow the interruption of concession-related activities.
Clause 33.2.
The
arbitration process shall start upon the notice, forwarded from one party to the other, requiring the convening of an Arbitration Court, as set forth in this Chapter, and detailing the issue giving rise to the dispute.
Sole paragraph.
Anatel may refuse the convening of Arbitration Court if it reasonably evidences that the related dispute fails to
fall into the list of issues set forth in Clause 33.1.
Clause 33.3.
The Arbitration Court shall be composed of five
(5) members, appointed as follows:
I – two (2) incumbent members and respective deputies appointed by
Anatel’s Steering Committee chosen from experts in the areas involved in the dispute, not belonging to its staff, and at least one member, which shall chair it, shall be specifically knowledgeable of telecommunications legal regulation;
II – two (2) incumbent members and respective deputies appointed by the Concessionaire, chosen from experts in the
areas involved in the dispute, not belonging to its staff, and at least one member shall be specifically knowledgeable of the telecommunications legal regulation; and
47
III – one (1) incumbent member and respective deputy appointed by the members
referred to in the foregoing items.
Paragraph 1
The Arbitration Court may be supported by technical experts if deemed
convenient by the Court.
Paragraph 2
The Arbitration Court shall be deemed as convened on the date when all
arbitrators accept their appointments and communicate both parts about their acceptance.
Paragraph 3
The Arbitration
Court shall judge according to the applicable law and its awards shall have enforceable effects, irrespective of any judicial confirmation.
Clause 33.4.
If not refused by Anatel or having any challenge thereof being overcome, the Process addressed in this Chapter shall start by following the procedures below:
I – the parties shall have ten (10) days counted from receipt of notices addressed in the preamble to the foregoing Clause to
appoint the members of the Arbitration Court, which shall be immediately convened after all its members are accepted.
II
– in the event one of the parties is inactive or has resisted the convening of an Arbitration Court, the adversary party may use the option set forth in article 7 of Law No. 9,307 of September 23, 1996;
III – after the Arbitration Court is convened, a successive period of twenty five (25) days shall start for the parties to
submit their reasoning on the disputed issue, and in such opportunity the parties may submit appraisal and expert reports opinions, gather documents and information deemed as significant to support their positions;
IV – after submission of documentation, the Court will review the submitted reasoning and may, upon request by one of its members,
determine the preparation of appraisal and expert reports or opinions, request information or documents from the parties, as well as carry out diligent works and take measures deemed as necessary for the perfect finding of facts with respect to the
disputed issue;
V – during the gathering of the elements referred to in the item above, the parties shall always be
allowed to state their positions and enjoy the adversarial principle, subject to the principles of informality, consensuality and celerity which shall guide the procedure;
VI – when the proceeding is declared as ended, a common period of fifteen (15) days shall be granted for the parties to submit their final allegations;
VII – after the period stated in the item above elapses, irrespective of the submission of final allegations, the Arbitration Court
shall issue its award no longer than thirty (30) days;
48
VIII – the Arbitration Court’s award shall not be challenged, except for a request
for reconsideration applicable solely in the event the award was adopted with majority of one vote only; and
IX – the
arbitration proceeding shall be deemed as invalid only in the events stated in article 32 of Law No. 9,307 of 1996.
Sole paragraph.
Any expenses on the arbitration proceeding, comprising, among others, costs on appraisal and expert reports, and
opinions, as well as Court members’ fees, shall be assigned to the Concessionaire or Anatel, in conformity with the Arbitration Court’s award.
Chapter XXXIV – Settlement of Conflicts
Clause 34.1.
Any
possible conflicts arising between the Concessionaire and other collective interest telecommunications service providers with respect to the interpretation and application of regulation may be submitted to Anatel, while exercising its regulatory
body role, pursuant to articles 8 and 19 of Law No. 9,472 of 1997, upon:
I – meeting to settle conflicts;
II – mediation proceeding; and
III – arbitration proceeding.
Sole paragraph.
The adoption of the
instruments stated in this Clause shall not jeopardize the use of any manners of administrative settlement of conflicts between service providers, pursuant to Anatel’s Bylaws.
Chapter XXXV – Applicable Legal System and Documents
Clause 35.1.
Without prejudice to other rules comprising the Brazilian legal system, this concession shall be ruled by Law No. 9,472, of July 16, 1997, and applicable regulation arising therefrom, especially the jurisdiction of the Executive
Branch, pursuant to article 18 of said Law; and in the event of any conflicts of law, the latter shall prevail.
Clause
35.2.
Upon the provision of services hereby granted, the national telecommunications policies and Anatel’s regulations shall be followed, especially the documents listed below:
I – General Licensing Plan;
II – General Plan on Universal Service;
III – General Quality Targets
Plan;
IV – General Competition Targets Plan;
V – Telecommunications Services Regulation;
49
VI – Switched Fixed Telephony Services Regulation;
VII – General Interconnection Regulation;
VIII – Numbering Regulation for the Switched Fixed Telephony Services;
IX
– Numbering Resources Management Regulation;
X – Regulation for Compensation for the Usage of STFC Networks;
XI – Local Areas Regulation;
XII – Regulation for the Use of Services and Telecommunications Networks for Access to Internet Services;
XIII – Regulation for Access Code Portability;
XIV – Sanctions
Regulation;
XV – Account Segregation and Allocation Regulation;
XVI – Regulation for Industrial Exploitation of Dedicated Lines;
XVII – Tariffs Regulation;
XVIII – Regulation for Systemic Interruption in the Switched Fixed Telephony Services
XIX – Regulation for Control over Reversible Assets;
XX – Regulation
for STFC Commercialization and Resale Offerings;
XXI – Regulation for Provision of STFC with the Usage of Non-Geographic
Access Code; and
XXII – Regulation for Disclosure of Lists of Subscribers and Issue and Distribution of Mandatory and
Free Telephone Directory.
Clause 35.3.
Upon interpretation of the rules and provisions stated in this Agreement the
general hermeneutics rules and the rules and principles stated in Law No. 9,472 of 1997, in addition to the documents referred to in item above, shall be taken into account.
Chapter XXXVI – Venue
Clause 36.1.
For settlement of any
issues arising from this Agreement which may not be settled by means of the proceedings stated in Chapter XXXIII – Arbitration, the parties hereto elect the Judiciary Section of the Federal Justice in Brasília – Federal District.
50
Chapter XXXVII – General Final Provisions
Clause 37.1.
This Agreement herein executed shall come into effect upon publication of its excerpt in the Official Federal Gazette.
Clause 37.2.
This Agreement may be amended unilaterally by means of supervening judicial provision, by force of law or
act by the Granting Power.
IN WITNESS WHEREOF, the Parties hereto execute this Agreement in three (3) counterparts of equal tenor in the
presence of the undersigned witnesses for all its legal purposes and effects.
Brasília, June 30, 2011.
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|
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|
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Anatel:
|
|
|
|
The Concessionaire:
|
|
|
|
|
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/s/ Ronaldo Mota Sardenberg
|
|
|
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/s/ João de Deus Pinheiro de Macedo
|
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RONALDO MOTA SARDENBERG
|
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JOÃO DE DEUS PINHEIRO DE MACEDO
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President
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Executive Planning Officer
|
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/s/ João Batista de Rezende
|
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|
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/s/ Paulo Todescan Lessa Mattos
|
|
JOÃO BATISTA DE REZENDE
|
|
|
|
PAULO TODESCAN LESSA MATTOS
|
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Board Member
|
|
|
|
Regulatory Officer
|
|
|
|
|
|
|
|
Witnesses:
|
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|
|
|
|
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/s/ Christian Charles Marlow
|
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|
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/s/ José Roberto Pereira Neder
|
|
CRISTIAN CHARLES MARLOW
Identity Card (CI): 7054254128 SSP-RS
Individual Taxpayer’s ID (CPF):
724.270.860-53
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JOSÉ ROBERTO PEREIRA NEDER
Identity Card (CI): 75124245 SSP-SP
Individual Taxpayer’s ID (CPF):
148.812.503-63
|
51
Exhibit 10.6
ATTACHMENT No. 1 QUALIFICATION OF REVERSIBLE ASSETS IN THE
PROVISION OF NATIONAL LONG-DISTANCE SWITCHED FIXED TELEPHONY
SERVICES
a) Switch and transmission infrastructure and equipment,
including public use terminals;
b) External network infrastructure and equipment;
c) Energy and air-conditioning infrastructure and equipment;
d) Infrastructure and equipment for User Information and Service Centers;
e)
Infrastructure and equipment for operation supporting systems;
f) Infrastructure and equipment installed due to
universalization obligations provided for in the General Plan on Universal Service, approved pursuant to article 18, item III, of Law No. 9,472 of July 16, 1997; and
g) Others fundamental to the service provision.
52
ATTACHMENT No. 2 – BASIC PLAN FOR NATIONAL LONG-DISTANCE SERVICE -
LDN
BRASIL TELECOM S.A.
Sector 18
1 - General
1.1. The Basic Plan for National Long-Distance Switched Fixed Telephony Services is governed by the regulation in force, the Acts
mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the
Long-Distance mode set forth in applicable regulation, including those related to changes to the tariff structure, are an integral part of this attachment as if they were included herein.
1.2. The tariffs submitted in this Attachment are the maximum ones and net of any levied taxes and social contributions.
2 – Use of the National Long-Distance Switched Fixed Telephony Services
2.1. Fixed-Fixed Calls
2.1.1. The tariff system in the Switched Fixed Telephony Services in the Long-Distance Mode (STFC LDN) takes into account the distance between the tariff area centers of the origin and destination
locations, its duration period, the type of call made, and the time it is made.
2.1.2. The tariff area centers of the
locations are approved pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.3. The use of the STFC LDN
shall be charged by Usage Time, and the tariff unit will be the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds, pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.4. Pursuant to Act No. 6,776 of October 19, 2010, the maximum amounts for tariff minute in the STFC LDN, in view of the
distance between the tariff area centers and the time the call is made, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step
|
|
Geodesic distance
|
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AMOUNTS in R$, without taxes
|
|
|
|
|
Differentiated
|
|
|
Normal
|
|
|
Reduced
|
|
|
Super-
reduced
|
|
|
D1
|
|
- Until 50 km
|
|
|
0.17137
|
|
|
|
0.09833
|
|
|
|
0.04913
|
|
|
|
0.03190
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|
|
D2
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|
> 50 until 100 km
|
|
|
0.37038
|
|
|
|
0.21723
|
|
|
|
0.12404
|
|
|
|
0.05870
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|
|
D3
|
|
> 100 until 300 km
|
|
|
0.41156
|
|
|
|
0.26003
|
|
|
|
0.17205
|
|
|
|
0.08873
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|
|
D4
|
|
> 300 km
|
|
|
0.41335
|
|
|
|
0.26593
|
|
|
|
0.18427
|
|
|
|
0.11750
|
|
53
2.1.5. The time modulation is defined by the STFC Tariff Regulation provided in the Public
system, as shown in the table below:
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|
|
|
|
|
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Time
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|
Mondays to Fridays
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|
Saturdays
|
|
Sundays and Holidays
|
|
From 12am to 6am
|
|
Super-reduced
|
|
Super-reduced
|
|
Super-reduced
|
|
From 6am to 7am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
|
From 7am to 9am
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 9am to 12pm
|
|
Differentiated
|
|
Normal
|
|
Reduced
|
|
From 12pm to 2pm
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 2pm to 6pm
|
|
Differentiated
|
|
Reduced
|
|
Reduced
|
|
From 6pm to 9pm
|
|
Normal
|
|
Reduced
|
|
Reduced
|
|
From 9pm to 12am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
2.1.6. Irrespective of the duration of the call, no additional fee shall be charged on the amounts
defined above.
2.1.7. For national long-distance calls originated in TUP (telephone for public usage) designed for accesses
to the STFC the tariff method based on the usage time will be adopted based on the value of the UTP (VTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the
subsequent units at every period in seconds corresponding to (VTP/Dn) x 60, where Dn is the tariff step value in which the related call falls into.
2.2. Calls involving other telecommunications services
2.2.1. The tariff
criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
2.2.1.1. The
tariff unit is the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds.
2.2.1.2. The
maximum communication minute values involving the PMS (VC-2 and VC-3), taking into account the type of call and pursuant to Act No. 971 of February 9, 2010, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
1.12059
|
|
|
1.27502
|
|
|
|
0.78441
|
|
|
|
0.89251
|
|
2.2.1.3. The time the reduced tariff will be charged for calls addressed to the PMS will be Mondays to
Saturdays from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian public holidays from 12am to 12am, pursuant to applicable regulation.
2.2.2. The tariff criteria and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
54
2.2.2.1. The tariff unit is the tenth of minute (six seconds) and the minimum tariff time
will be thirty (30) seconds.
2.2.2.2. The maximum communication minute values involving the PMS (VC-2 and VC-3), taking
into account the type of call and pursuant to Act No. 54,687 of December 12, 2005, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
0.90465
|
|
|
1.02931
|
|
|
|
0.63325
|
|
|
|
0.72051
|
|
2.2.3. For national long-distance calls originated in TUP (telephone for public usage) designed to other
collective interest services, which registration areas are different and do not contain the originating TUP tariff area, the tariff method based on the usage time will be adopted, based on the value of the UTP (VTP) and the communication value in
which the related call falls into.
2.2.4. The tariff criteria and procedures for other telecommunications services of
collective interest are those defined by ANATEL pursuant to applicable regulation.
55
ATTACHMENT No. 2 – BASIC PLAN FOR NATIONAL LONG-DISTANCE SERVICE - LDN
BRASIL TELECOM S.A.
Sector 19
1 - General
1.1. The Basic Plan for National Long-Distance Switched Fixed Telephony Services is governed by the regulation in force, the Acts
mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the
Long-Distance mode set forth in applicable regulation, including those related to changes to the tariff structure, are an integral part of this attachment as if they were included herein.
1.2. The tariffs submitted in this Attachment are the maximum ones and net of any levied taxes and social contributions.
2 – Use of the National Long-Distance Switched Fixed Telephony Services
2.1. Fixed-Fixed Calls
2.1.1. The tariff system in the Switched Fixed Telephony Services in the Long-Distance Mode (STFC LDN) takes into account the distance between the tariff area centers of the origin and destination
locations, its duration period, the type of call made, and the time it is made.
2.1.2. The tariff area centers of the
locations are approved pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.3. The use of the STFC LDN
shall be charged by Usage Time, and the tariff unit will be the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds, pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.4. Pursuant to Act No. 6,776 of October 19, 2010, the maximum amounts for tariff minute in the STFC LDN, in view of the
distance between the tariff area centers and the time the call is made, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step
|
|
Geodesic distance
|
|
AMOUNTS in R$, without taxes
|
|
|
|
|
Differentiated
|
|
|
Normal
|
|
|
Reduced
|
|
|
Super-
reduced
|
|
|
D1
|
|
- Until 50 km
|
|
|
0.17141
|
|
|
|
0.09835
|
|
|
|
0.04915
|
|
|
|
0.03176
|
|
|
D2
|
|
> 50 until 100 km
|
|
|
0.36152
|
|
|
|
0.22013
|
|
|
|
0.11290
|
|
|
|
0.05802
|
|
|
D3
|
|
> 100 until 300 km
|
|
|
0.38809
|
|
|
|
0.26562
|
|
|
|
0.17940
|
|
|
|
0.08709
|
|
|
D4
|
|
> 300 km
|
|
|
0.40217
|
|
|
|
0.26562
|
|
|
|
0.22523
|
|
|
|
0.11615
|
|
56
2.1.5. The time modulation is defined by the STFC Tariff Regulation provided in the Public
system, as shown in the table below:
|
|
|
|
|
|
|
|
|
Time
|
|
Mondays to Fridays
|
|
Saturdays
|
|
Sundays and Holidays
|
|
From 12am to 6am
|
|
Super-reduced
|
|
Super-reduced
|
|
Super-reduced
|
|
From 6am to 7am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
|
From 7am to 9am
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 9am to 12pm
|
|
Differentiated
|
|
Normal
|
|
Reduced
|
|
From 12pm to 2pm
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 2pm to 6pm
|
|
Differentiated
|
|
Reduced
|
|
Reduced
|
|
From 6pm to 9pm
|
|
Normal
|
|
Reduced
|
|
Reduced
|
|
From 9pm to 12am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
2.1.6. Irrespective of the duration of the call, no additional fee shall be charged on the amounts
defined above.
2.1.7. For national long-distance calls originated in TUP (telephone for public usage) designed for accesses
to the STFC the tariff method based on the usage time will be adopted based on the value of the UTP (VTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the
subsequent units at every period in seconds corresponding to (VTP/Dn) x 60, where Dn is the tariff step value in which the related call falls into.
2.2. Calls involving other telecommunications services
2.2.1. The tariff
criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
2.2.1.1. The
tariff unit is the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds.
2.2.1.2. The
maximum communication minute values involving the PMS (VC-2 and VC-3), taking into account the type of call and pursuant to Act No. 971 of February 9, 2010, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
1.12059
|
|
|
1.27502
|
|
|
|
0.78441
|
|
|
|
0.89251
|
|
2.2.1.3. The time the reduced tariff will be charged for calls addressed to the PMS will be Mondays to
Saturdays from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian public holidays from 12am to 12am, pursuant to applicable regulation.
2.2.2. The tariff criteria and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
57
2.2.2.1. The tariff unit is the tenth of minute (six seconds) and the minimum tariff time
will be thirty (30) seconds.
2.2.2.2. The maximum communication minute values involving the PMS (VC-2 and VC-3), taking
into account the type of call and pursuant to Act No. 54,687 of December 12, 2005, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
0.90465
|
|
|
1.02931
|
|
|
|
0.63325
|
|
|
|
0.72051
|
|
2.2.3. For national long-distance calls originated in TUP (telephone for public usage) designed to other
collective interest services, which registration areas are different and do not contain the originating TUP tariff area, the tariff method based on the usage time will be adopted, based on the value of the UTP (VTP) and the communication value in
which the related call falls into.
2.2.4. The tariff criteria and procedures for other telecommunications services of
collective interest are those defined by ANATEL pursuant to applicable regulation.
58
ATTACHMENT No. 2 – BASIC PLAN FOR NATIONAL LONG-DISTANCE SERVICE - LDN
BRASIL TELECOM S.A.
Sector 21
1 - General
1.1. The Basic Plan for National Long-Distance Switched Fixed Telephony Services is governed by the regulation in force, the Acts
mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the
Long-Distance mode set forth in applicable regulation, including those related to changes to the tariff structure, are an integral part of this attachment as if they were included herein.
1.2. The tariffs submitted in this Attachment are the maximum ones and net of any levied taxes and social contributions.
2 – Use of the National Long-Distance Switched Fixed Telephony Services
2.1. Fixed-Fixed Calls
2.1.1. The tariff system in the Switched Fixed Telephony Services in the Long-Distance Mode (STFC LDN) takes into account the distance between the tariff area centers of the origin and destination
locations, its duration period, the type of call made, and the time it is made.
2.1.2. The tariff area centers of the
locations are approved pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.3. The use of the STFC LDN
shall be charged by Usage Time, and the tariff unit will be the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds, pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.4. Pursuant to Act No. 6,776 of October 19, 2010, the maximum amounts for tariff minute in the STFC LDN, in view of the
distance between the tariff area centers and the time the call is made, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step
|
|
Geodesic distance
|
|
AMOUNTS in R$, without taxes
|
|
|
|
|
Differentiated
|
|
|
Normal
|
|
|
Reduced
|
|
|
Super-
reduced
|
|
|
D1
|
|
- Until 50 km
|
|
|
0.17141
|
|
|
|
0.09833
|
|
|
|
0.04913
|
|
|
|
0.03176
|
|
|
D2
|
|
> 50 until 100 km
|
|
|
0.35364
|
|
|
|
0.21406
|
|
|
|
0.11554
|
|
|
|
0.05720
|
|
|
D3
|
|
> 100 until 300 km
|
|
|
0.38648
|
|
|
|
0.25553
|
|
|
|
0.17428
|
|
|
|
0.08581
|
|
|
D4
|
|
> 300 km
|
|
|
0.39970
|
|
|
|
0.25553
|
|
|
|
0.22808
|
|
|
|
0.11444
|
|
59
2.1.5. The time modulation is defined by the STFC Tariff Regulation provided in the Public
system, as shown in the table below:
|
|
|
|
|
|
|
|
|
Time
|
|
Mondays to Fridays
|
|
Saturdays
|
|
Sundays and Holidays
|
|
From 12am to 6am
|
|
Super-reduced
|
|
Super-reduced
|
|
Super-reduced
|
|
From 6am to 7am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
|
From 7am to 9am
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 9am to 12pm
|
|
Differentiated
|
|
Normal
|
|
Reduced
|
|
From 12pm to 2pm
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 2pm to 6pm
|
|
Differentiated
|
|
Reduced
|
|
Reduced
|
|
From 6pm to 9pm
|
|
Normal
|
|
Reduced
|
|
Reduced
|
|
From 9pm to 12am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
2.1.6. Irrespective of the duration of the call, no additional fee shall be charged on the amounts
defined above.
2.1.7. For national long-distance calls originated in TUP (telephone for public usage) designed for accesses
to the STFC the tariff method based on the usage time will be adopted based on the value of the UTP (VTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the
subsequent units at every period in seconds corresponding to (VTP/Dn) x 60, where Dn is the tariff step value in which the related call falls into.
2.2. Calls involving other telecommunications services
2.2.1. The tariff
criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
2.2.1.1. The
tariff unit is the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds.
2.2.1.2. The
maximum communication minute values involving the PMS (VC-2 and VC-3), taking into account the type of call and pursuant to Act No. 971 of February 9, 2010, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
1.12059
|
|
|
1.27502
|
|
|
|
0.78441
|
|
|
|
0.89251
|
|
2.2.1.3. The time the reduced tariff will be charged for calls addressed to the PMS will be Mondays to
Saturdays from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian public holidays from 12am to 12am, pursuant to applicable regulation.
2.2.2. The tariff criteria and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
60
2.2.2.1. The tariff unit is the tenth of minute (six seconds) and the minimum tariff time
will be thirty (30) seconds.
2.2.2.2. The maximum communication minute values involving the PMS (VC-2 and VC-3), taking
into account the type of call and pursuant to Act No. 54,687 of December 12,, 2005, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
0.90465
|
|
|
1.02931
|
|
|
|
0.63325
|
|
|
|
0.72051
|
|
2.2.3. For national long-distance calls originated in TUP (telephone for public usage) designed to other
collective interest services, which registration areas are different and do not contain the originating TUP tariff area, the tariff method based on the usage time will be adopted, based on the value of the UTP (VTP) and the communication value in
which the related call falls into.
2.2.4. The tariff criteria and procedures for other telecommunications services of
collective interest are those defined by ANATEL pursuant to applicable regulation.
61
ATTACHMENT No. 2 – BASIC PLAN FOR NATIONAL LONG-DISTANCE SERVICE - LDN
BRASIL TELECOM S.A.
Sector 23
1 - General
1.1. The Basic Plan for National Long-Distance Switched Fixed Telephony Services is governed by the regulation in force, the Acts
mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the
Long-Distance mode set forth in applicable regulation, including those related to changes to the tariff structure, are an integral part of this attachment as if they were included herein.
1.2. The tariffs submitted in this Attachment are the maximum ones and net of any levied taxes and social contributions.
2 – Use of the National Long-Distance Switched Fixed Telephony Services
2.1. Fixed-Fixed Calls
2.1.1. The tariff system in the Switched Fixed Telephony Services in the Long-Distance Mode (STFC LDN) takes into account the distance between the tariff area centers of the origin and destination
locations, its duration period, the type of call made, and the time it is made.
2.1.2. The tariff area centers of the
locations are approved pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.3. The use of the STFC LDN
shall be charged by Usage Time, and the tariff unit will be the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds, pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.4. Pursuant to Act No. 6,776 of October 19, 2010, the maximum amounts for tariff minute in the STFC LDN, in view of the
distance between the tariff area centers and the time the call is made, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step
|
|
Geodesic distance
|
|
AMOUNTS in R$, without taxes
|
|
|
|
|
Differentiated
|
|
|
Normal
|
|
|
Reduced
|
|
|
Super-
reduced
|
|
|
D1
|
|
- Until 50 km
|
|
|
0.17141
|
|
|
|
0.09835
|
|
|
|
0.04915
|
|
|
|
0.03176
|
|
|
D2
|
|
> 50 until 100 km
|
|
|
0.35381
|
|
|
|
0.21370
|
|
|
|
0.11680
|
|
|
|
0.05721
|
|
|
D3
|
|
> 100 until 300 km
|
|
|
0.38438
|
|
|
|
0.25561
|
|
|
|
0.17520
|
|
|
|
0.08587
|
|
|
D4
|
|
> 300 km
|
|
|
0.40816
|
|
|
|
0.25608
|
|
|
|
0.23068
|
|
|
|
0.11452
|
|
62
2.1.5. The time modulation is defined by the STFC Tariff Regulation provided in the Public
system, as shown in the table below:
|
|
|
|
|
|
|
|
|
Time
|
|
Mondays to Fridays
|
|
Saturdays
|
|
Sundays and Holidays
|
|
From 12am to 6am
|
|
Super-reduced
|
|
Super-reduced
|
|
Super-reduced
|
|
From 6am to 7am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
|
From 7am to 9am
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 9am to 12pm
|
|
Differentiated
|
|
Normal
|
|
Reduced
|
|
From 12pm to 2pm
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 2pm to 6pm
|
|
Differentiated
|
|
Reduced
|
|
Reduced
|
|
From 6pm to 9pm
|
|
Normal
|
|
Reduced
|
|
Reduced
|
|
From 9pm to 12am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
2.1.6. Irrespective of the duration of the call, no additional fee shall be charged on the amounts
defined above.
2.1.7. For national long-distance calls originated in TUP (telephone for public usage) designed for accesses
to the STFC the tariff method based on the usage time will be adopted based on the value of the UTP (VTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the
subsequent units at every period in seconds corresponding to (VTP/Dn) x 60, where Dn is the tariff step value in which the related call falls into.
2.2. Calls involving other telecommunications services
2.2.1. The tariff
criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
2.2.1.1. The
tariff unit is the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds.
2.2.1.2. The
maximum communication minute values involving the PMS (VC-2 and VC-3), taking into account the type of call and pursuant to Act No. 971 of February 9, 2010, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
1.12059
|
|
|
1.27502
|
|
|
|
0.78441
|
|
|
|
0.89251
|
|
2.2.1.3. The time the reduced tariff will be charged for calls addressed to the PMS will be Mondays to
Saturdays from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian public holidays from 12am to 12am, pursuant to applicable regulation.
2.2.2. The tariff criteria and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
63
2.2.2.1. The tariff unit is the tenth of minute (six seconds) and the minimum tariff time
will be thirty (30) seconds.
2.2.2.2. The maximum communication minute values involving the PMS (VC-2 and VC-3), taking
into account the type of call and pursuant to Act No. 54,687 of December 12, 2005, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
0.90465
|
|
|
1.02931
|
|
|
|
0.63325
|
|
|
|
0.72051
|
|
2.2.3. For national long-distance calls originated in TUP (telephone for public usage) designed to other
collective interest services, which registration areas are different and do not contain the originating TUP tariff area, the tariff method based on the usage time will be adopted, based on the value of the UTP (VTP) and the communication value in
which the related call falls into.
2.2.4. The tariff criteria and procedures for other telecommunications services of
collective interest are those defined by ANATEL pursuant to applicable regulation.
64
ATTACHMENT No. 2 – BASIC PLAN FOR NATIONAL LONG-DISTANCE SERVICE - LDN
BRASIL TELECOM S.A.
Sector 24
1 - General
1.1. The Basic Plan for National Long-Distance Switched Fixed Telephony Services is governed by the regulation in force, the Acts
mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the
Long-Distance mode set forth in applicable regulation, including those related to changes to the tariff structure, are an integral part of this attachment as if they were included herein.
1.2. The tariffs submitted in this Attachment are the maximum ones and net of any levied taxes and social contributions.
2 – Use of the National Long-Distance Switched Fixed Telephony Services
2.1. Fixed-Fixed Calls
2.1.1. The tariff system in the Switched Fixed Telephony Services in the Long-Distance Mode (STFC LDN) takes into account the distance between the tariff area centers of the origin and destination
locations, its duration period, the type of call made, and the time it is made.
2.1.2. The tariff area centers of the
locations are approved pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.3. The use of the STFC LDN
shall be charged by Usage Time, and the tariff unit will be the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds, pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.4. Pursuant to Act No. 6,776 of October 19, 2010, the maximum amounts for tariff minute in the STFC LDN, in view of the
distance between the tariff area centers and the time the call is made, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step
|
|
Geodesic distance
|
|
AMOUNTS in R$, without taxes
|
|
|
|
|
Differentiated
|
|
|
Normal
|
|
|
Reduced
|
|
|
Super-
reduced
|
|
|
D1
|
|
- Until 50 km
|
|
|
0.17141
|
|
|
|
0.09833
|
|
|
|
0.04915
|
|
|
|
0.03176
|
|
|
D2
|
|
> 50 until 100 km
|
|
|
0.35352
|
|
|
|
0.21505
|
|
|
|
0.11579
|
|
|
|
0.05757
|
|
|
D3
|
|
> 100 until 300 km
|
|
|
0.37761
|
|
|
|
0.25362
|
|
|
|
0.17799
|
|
|
|
0.08641
|
|
|
D4
|
|
> 300 km
|
|
|
0.394450
|
|
|
|
0.25977
|
|
|
|
0.23299
|
|
|
|
0.11559
|
|
65
2.1.5. The time modulation is defined by the STFC Tariff Regulation provided in the Public
system, as shown in the table below:
|
|
|
|
|
|
|
|
|
Time
|
|
Mondays to Fridays
|
|
Saturdays
|
|
Sundays and Holidays
|
|
From 12am to 6am
|
|
Super-reduced
|
|
Super-reduced
|
|
Super-reduced
|
|
From 6am to 7am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
|
From 7am to 9am
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 9am to 12pm
|
|
Differentiated
|
|
Normal
|
|
Reduced
|
|
From 12pm to 2pm
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 2pm to 6pm
|
|
Differentiated
|
|
Reduced
|
|
Reduced
|
|
From 6pm to 9pm
|
|
Normal
|
|
Reduced
|
|
Reduced
|
|
From 9pm to 12am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
2.1.6. Irrespective of the duration of the call, no additional fee shall be charged on the amounts
defined above.
2.1.7. For national long-distance calls originated in TUP (telephone for public usage) designed for accesses
to the STFC the tariff method based on the usage time will be adopted based on the value of the UTP (VTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the
subsequent units at every period in seconds corresponding to (VTP/Dn) x 60, where Dn is the tariff step value in which the related call falls into.
2.2. Calls involving other telecommunications services
2.2.1. The tariff
criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
2.2.1.1. The
tariff unit is the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds.
2.2.1.2. The
maximum communication minute values involving the PMS (VC-2 and VC-3), taking into account the type of call and pursuant to Act No. 971 of February 9, 2010, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
1.12059
|
|
|
1.27502
|
|
|
|
0.78441
|
|
|
|
0.89251
|
|
2.2.1.3. The time the reduced tariff will be charged for calls addressed to the PMS will be Mondays to
Saturdays from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian public holidays from 12am to 12am, pursuant to applicable regulation.
2.2.2. The tariff criteria and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
66
2.2.2.1. The tariff unit is the tenth of minute (six seconds) and the minimum tariff time
will be thirty (30) seconds.
2.2.2.2. The maximum communication minute values involving the PMS (VC-2 and VC-3), taking
into account the type of call and pursuant to Act No. 54,687 of December 12, 2005, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
0.90465
|
|
|
1.02931
|
|
|
|
0.63325
|
|
|
|
0.72051
|
|
2.2.3. For national long-distance calls originated in TUP (telephone for public usage) designed to other
collective interest services, which registration areas are different and do not contain the originating TUP tariff area, the tariff method based on the usage time will be adopted, based on the value of the UTP (VTP) and the communication value in
which the related call falls into.
2.2.4. The tariff criteria and procedures for other telecommunications services of
collective interest are those defined by ANATEL pursuant to applicable regulation.
67
ATTACHMENT No. 2 – BASIC PLAN FOR NATIONAL LONG-DISTANCE SERVICE - LDN
BRASIL TELECOM S.A.
Sector 26
1 - General
1.1. The Basic Plan for National Long-Distance Switched Fixed Telephony Services is governed by the regulation in force, the Acts
mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the
Long-Distance mode set forth in applicable regulation, including those related to changes to the tariff structure, are an integral part of this attachment as if they were included herein.
1.2. The tariffs submitted in this Attachment are the maximum ones and net of any levied taxes and social contributions.
2 – Use of the National Long-Distance Switched Fixed Telephony Services
2.1. Fixed-Fixed Calls
2.1.1. The tariff system in the Switched Fixed Telephony Services in the Long-Distance Mode (STFC LDN) takes into account the distance between the tariff area centers of the origin and destination
locations, its duration period, the type of call made, and the time it is made.
2.1.2. The tariff area centers of the
locations are approved pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.3. The use of the STFC LDN
shall be charged by Usage Time, and the tariff unit will be the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds, pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.4. Pursuant to Act No. 6,776 of October 19, 2010, the maximum amounts for tariff minute in the STFC LDN, in view of the
distance between the tariff area centers and the time the call is made, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step
|
|
Geodesic distance
|
|
AMOUNTS in R$, without taxes
|
|
|
|
|
Differentiated
|
|
|
Normal
|
|
|
Reduced
|
|
|
Super-
reduced
|
|
|
D1
|
|
- Until 50 km
|
|
|
0.17402
|
|
|
|
0.09984
|
|
|
|
0.04988
|
|
|
|
0.03255
|
|
|
D2
|
|
> 50 until 100 km
|
|
|
0.34391
|
|
|
|
0.22163
|
|
|
|
0.11488
|
|
|
|
0.05886
|
|
|
D3
|
|
> 100 until 300 km
|
|
|
0.37941
|
|
|
|
0.26123
|
|
|
|
0.17370
|
|
|
|
0.08612
|
|
|
D4
|
|
> 300 km
|
|
|
0.39164
|
|
|
|
0.30106
|
|
|
|
0.22248
|
|
|
|
0.11501
|
|
68
2.1.5. The time modulation is defined by the STFC Tariff Regulation provided in the Public
system, as shown in the table below:
|
|
|
|
|
|
|
|
|
Time
|
|
Mondays to Fridays
|
|
Saturdays
|
|
Sundays and Holidays
|
|
From 12am to 6am
|
|
Super-reduced
|
|
Super-reduced
|
|
Super-reduced
|
|
From 6am to 7am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
|
From 7am to 9am
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 9am to 12pm
|
|
Differentiated
|
|
Normal
|
|
Reduced
|
|
From 12pm to 2pm
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 2pm to 6pm
|
|
Differentiated
|
|
Reduced
|
|
Reduced
|
|
From 6pm to 9pm
|
|
Normal
|
|
Reduced
|
|
Reduced
|
|
From 9pm to 12am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
2.1.6. Irrespective of the duration of the call, no additional fee shall be charged on the amounts
defined above.
2.1.7. For national long-distance calls originated in TUP (telephone for public usage) designed for accesses
to the STFC the tariff method based on the usage time will be adopted based on the value of the UTP (VTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the
subsequent units at every period in seconds corresponding to (VTP/Dn) x 60, where Dn is the tariff step value in which the related call falls into.
2.2. Calls involving other telecommunications services
2.2.1. The tariff
criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
2.2.1.1. The
tariff unit is the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds.
2.2.1.2. The
maximum communication minute values involving the PMS (VC-2 and VC-3), taking into account the type of call and pursuant to Act No. 971 of February 9, 2010, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
1.12059
|
|
|
1.27502
|
|
|
|
0.78441
|
|
|
|
0.89251
|
|
The time the reduced tariff will be charged for calls addressed to the PMS will be Mondays to Saturdays
from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian public holidays from 12am to 12am, pursuant to applicable regulation.
2.2.2. The tariff criteria and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
69
2.2.2.1. The tariff unit is the tenth of minute (six seconds) and the minimum tariff time
will be thirty (30) seconds.
2.2.2.2. The maximum communication minute values involving the PMS (VC-2 and VC-3), taking
into account the type of call and pursuant to Act No. 54,687 of December 12, 2005, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
0.90465
|
|
|
1.02931
|
|
|
|
0.63325
|
|
|
|
0.72051
|
|
2.2.3. For national long-distance calls originated in TUP (telephone for public usage) designed to other
collective interest services, which registration areas are different and do not contain the originating TUP tariff area, the tariff method based on the usage time will be adopted, based on the value of the UTP (VTP) and the communication value in
which the related call falls into.
2.2.4. The tariff criteria and procedures for other telecommunications services of
collective interest are those defined by ANATEL pursuant to applicable regulation.
70
ATTACHMENT No. 2 – BASIC PLAN FOR NATIONAL LONG-DISTANCE SERVICE - LDN
BRASIL TELECOM S.A.
Sector 27
1 - General
1.1. The Basic Plan for National Long-Distance Switched Fixed Telephony Services is governed by the regulation in force, the Acts
mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the
Long-Distance mode set forth in applicable regulation, including those related to changes to the tariff structure, are an integral part of this attachment as if they were included herein.
1.2. The tariffs submitted in this Attachment are the maximum ones and net of any levied taxes and social contributions.
2 – Use of the National Long-Distance Switched Fixed Telephony Services
2.1. Fixed-Fixed Calls
2.1.1. The tariff system in the Switched Fixed Telephony Services in the Long-Distance Mode (STFC LDN) takes into account the distance between the tariff area centers of the origin and destination
locations, its duration period, the type of call made, and the time it is made.
2.1.2. The tariff area centers of the
locations are approved pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.3. The use of the STFC LDN
shall be charged by Usage Time, and the tariff unit will be the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds, pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.4. Pursuant to Act No. 6,776 of October 19, 2010, the maximum amounts for tariff minute in the STFC LDN, in view of the
distance between the tariff area centers and the time the call is made, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step
|
|
Geodesic distance
|
|
AMOUNTS in R$, without taxes
|
|
|
|
|
Differentiated
|
|
|
Normal
|
|
|
Reduced
|
|
|
Super-
reduced
|
|
|
D1
|
|
- Until 50 km
|
|
|
0.17102
|
|
|
|
0.09838
|
|
|
|
0.04918
|
|
|
|
0.03178
|
|
|
D2
|
|
> 50 until 100 km
|
|
|
0.36159
|
|
|
|
0.21504
|
|
|
|
0.11753
|
|
|
|
0.05757
|
|
|
D3
|
|
> 100 until 300 km
|
|
|
0.39573
|
|
|
|
0.25716
|
|
|
|
0.17661
|
|
|
|
0.08640
|
|
|
D4
|
|
> 300 km
|
|
|
0.41571
|
|
|
|
0.25821
|
|
|
|
0.23289
|
|
|
|
0.11522
|
|
71
2.1.5. The time modulation is defined by the STFC Tariff Regulation provided in the Public
system, as shown in the table below:
|
|
|
|
|
|
|
|
|
Time
|
|
Mondays to Fridays
|
|
Saturdays
|
|
Sundays and Holidays
|
|
From 12am to 6am
|
|
Super-reduced
|
|
Super-reduced
|
|
Super-reduced
|
|
From 6am to 7am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
|
From 7am to 9am
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 9am to 12pm
|
|
Differentiated
|
|
Normal
|
|
Reduced
|
|
From 12pm to 2pm
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 2pm to 6pm
|
|
Differentiated
|
|
Reduced
|
|
Reduced
|
|
From 6pm to 9pm
|
|
Normal
|
|
Reduced
|
|
Reduced
|
|
From 9pm to 12am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
2.1.6. Irrespective of the duration of the call, no additional fee shall be charged on the amounts
defined above.
2.1.7. For national long-distance calls originated in TUP (telephone for public usage) designed for accesses
to the STFC the tariff method based on the usage time will be adopted based on the value of the UTP (VTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the
subsequent units at every period in seconds corresponding to (VTP/Dn) x 60, where Dn is the tariff step value in which the related call falls into.
2.2. Calls involving other telecommunications services
2.2.1. The tariff
criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
2.2.1.1. The
tariff unit is the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds.
2.2.1.2. The
maximum communication minute values involving the PMS (VC-2 and VC-3), taking into account the type of call and pursuant to Act No. 971 of February 9, 2010, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
1.12059
|
|
|
1.27502
|
|
|
|
0.78441
|
|
|
|
0.89251
|
|
2.2.1.3 The time the reduced tariff will be charged for calls addressed to the PMS will be Mondays to
Saturdays from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian public holidays from 12am to 12am, pursuant to applicable regulation.
2.2.2. The tariff criteria and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
72
2.2.2.1. The tariff unit is the tenth of minute (six seconds) and the minimum tariff time
will be thirty (30) seconds.
2.2.2.2. The maximum communication minute values involving the PMS (VC-2 and VC-3), taking
into account the type of call and pursuant to Act No. 54,687 of December 12, 2005, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
0.90465
|
|
|
1.02931
|
|
|
|
0.63325
|
|
|
|
0.72051
|
|
2.2.3. For national long-distance calls originated in TUP (telephone for public usage) designed to other
collective interest services, which registration areas are different and do not contain the originating TUP tariff area, the tariff method based on the usage time will be adopted, based on the value of the UTP (VTP) and the communication value in
which the related call falls into.
2.2.4. The tariff criteria and procedures for other telecommunications services of
collective interest are those defined by ANATEL pursuant to applicable regulation.
73
ATTACHMENT No. 2 – BASIC PLAN FOR NATIONAL LONG-DISTANCE SERVICE - LDN
BRASIL TELECOM S.A.
Sector 28
1 - General
1.1. The Basic Plan for National Long-Distance Switched Fixed Telephony Services is governed by the regulation in force, the Acts
mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the
Long-Distance mode set forth in applicable regulation, including those related to changes to the tariff structure, are an integral part of this attachment as if they were included herein.
1.2. The tariffs submitted in this Attachment are the maximum ones and net of any levied taxes and social contributions.
2 – Use of the National Long-Distance Switched Fixed Telephony Services
2.1. Fixed-Fixed Calls
2.1.1. The tariff system in the Switched Fixed Telephony Services in the Long-Distance Mode (STFC LDN) takes into account the distance between the tariff area centers of the origin and destination
locations, its duration period, the type of call made, and the time it is made.
2.1.2. The tariff area centers of the
locations are approved pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.3. The use of the STFC LDN
shall be charged by Usage Time, and the tariff unit will be the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds, pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.4. Pursuant to Act No. 6,776 of October 19, 2010, the maximum amounts for tariff minute in the STFC LDN, in view of the
distance between the tariff area centers and the time the call is made, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step
|
|
Geodesic distance
|
|
AMOUNTS in R$, without taxes
|
|
|
|
|
Differentiated
|
|
|
Normal
|
|
|
Reduced
|
|
|
Super-
reduced
|
|
|
D1
|
|
- Until 50 km
|
|
|
0.17142
|
|
|
|
0.09834
|
|
|
|
0.04916
|
|
|
|
0.03176
|
|
|
D2
|
|
> 50 until 100 km
|
|
|
0.35652
|
|
|
|
0.21263
|
|
|
|
0.12050
|
|
|
|
0.05735
|
|
|
D3
|
|
> 100 until 300 km
|
|
|
0.38871
|
|
|
|
0.25328
|
|
|
|
0.17505
|
|
|
|
0.08609
|
|
|
D4
|
|
> 300 km
|
|
|
0.41846
|
|
|
|
0.25642
|
|
|
|
0.23122
|
|
|
|
0.11481
|
|
74
2.1.5. The time modulation is defined by the STFC Tariff Regulation provided in the Public
system, as shown in the table below:
|
|
|
|
|
|
|
|
|
Time
|
|
Mondays to Fridays
|
|
Saturdays
|
|
Sundays and Holidays
|
|
From 12am to 6am
|
|
Super-reduced
|
|
Super-reduced
|
|
Super-reduced
|
|
From 6am to 7am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
|
From 7am to 9am
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 9am to 12pm
|
|
Differentiated
|
|
Normal
|
|
Reduced
|
|
From 12pm to 2pm
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 2pm to 6pm
|
|
Differentiated
|
|
Reduced
|
|
Reduced
|
|
From 6pm to 9pm
|
|
Normal
|
|
Reduced
|
|
Reduced
|
|
From 9pm to 12am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
2.1.6. Irrespective of the duration of the call, no additional fee shall be charged on the amounts
defined above.
2.1.7. For national long-distance calls originated in TUP (telephone for public usage) designed for accesses
to the STFC the tariff method based on the usage time will be adopted based on the value of the UTP (VTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the
subsequent units at every period in seconds corresponding to (VTP/Dn) x 60, where Dn is the tariff step value in which the related call falls into.
2.2. Calls involving other telecommunications services
2.2.1. The tariff
criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
2.2.1.1. The
tariff unit is the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds.
2.2.1.2. The
maximum communication minute values involving the PMS (VC-2 and VC-3), taking into account the type of call and pursuant to Act No. 971 of February 9, 2010, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
1.12059
|
|
|
1.27502
|
|
|
|
0.78441
|
|
|
|
0.89251
|
|
The time the reduced tariff will be charged for calls addressed to the PMS will be Mondays to Saturdays
from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian public holidays from 12am to 12am, pursuant to applicable regulation.
2.2.2. The tariff criteria and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
75
2.2.2.1. The tariff unit is the tenth of minute (six seconds) and the minimum tariff time
will be thirty (30) seconds.
2.2.2.2. The maximum communication minute values involving the PMS (VC-2 and VC-3), taking
into account the type of call and pursuant to Act No. 54,687 of December 12, 2005, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
0.90465
|
|
|
1.02931
|
|
|
|
0.63325
|
|
|
|
0.72051
|
|
2.2.3. For national long-distance calls originated in TUP (telephone for public usage) designed to other
collective interest services, which registration areas are different and do not contain the originating TUP tariff area, the tariff method based on the usage time will be adopted, based on the value of the UTP (VTP) and the communication value in
which the related call falls into.
2.2.4. The tariff criteria and procedures for other telecommunications services of
collective interest are those defined by ANATEL pursuant to applicable regulation.
76
ATTACHMENT No. 2 – BASIC PLAN FOR NATIONAL LONG-DISTANCE SERVICE - LDN
BRASIL TELECOM S.A.
Sector 29
1 - General
1.1. The Basic Plan for National Long-Distance Switched Fixed Telephony Services is governed by the regulation in force, the Acts
mentioned in this attachment and any others to succeed the latter.
1.1.1. Other conditions for provision of the STFC in the
Long-Distance mode set forth in applicable regulation, including those related to changes to the tariff structure, are an integral part of this attachment as if they were included herein.
1.2. The tariffs submitted in this Attachment are the maximum ones and net of any levied taxes and social contributions.
2 – Use of the National Long-Distance Switched Fixed Telephony Services
2.1. Fixed-Fixed Calls
2.1.1. The tariff system in the Switched Fixed Telephony Services in the Long-Distance Mode (STFC LDN) takes into account the distance between the tariff area centers of the origin and destination
locations, its duration period, the type of call made, and the time it is made.
2.1.2. The tariff area centers of the
locations are approved pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.3. The use of the STFC LDN
shall be charged by Usage Time, and the tariff unit will be the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds, pursuant to the STFC Tariff Regulation provided in the Public system.
2.1.4. Pursuant to Act No. 6,776 of October 19, 2010, the maximum amounts for tariff minute in the STFC LDN, in view of the
distance between the tariff area centers and the time the call is made, are as follows:
Sector 29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step
|
|
Geodesic distance
|
|
AMOUNTS in R$, without taxes
|
|
|
|
|
Differentiated
|
|
|
Normal
|
|
|
Reduced
|
|
|
Super-
reduced
|
|
|
D1
|
|
- Until 50 km
|
|
|
0.17141
|
|
|
|
0.09833
|
|
|
|
0.04913
|
|
|
|
0.03175
|
|
|
D2
|
|
> 50 until 100 km
|
|
|
0.36611
|
|
|
|
0.21848
|
|
|
|
0.12225
|
|
|
|
0.05848
|
|
|
D3
|
|
> 100 until 300 km
|
|
|
0.38131
|
|
|
|
0.25436
|
|
|
|
0.18344
|
|
|
|
0.08731
|
|
|
D4
|
|
> 300 km
|
|
|
0.38514
|
|
|
|
0.25506
|
|
|
|
0.21170
|
|
|
|
0.11644
|
|
77
Sector 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step
|
|
Geodesic distance
|
|
AMOUNTS in R$, without taxes
|
|
|
|
|
Differentiated
|
|
|
Normal
|
|
|
Reduced
|
|
|
Super-
reduced
|
|
|
D1
|
|
- Until 50 km
|
|
|
0.17141
|
|
|
|
0.09833
|
|
|
|
0.04913
|
|
|
|
0.03176
|
|
|
D2
|
|
> 50 until 100 km
|
|
|
0.36616
|
|
|
|
0.21580
|
|
|
|
0.12135
|
|
|
|
0.05777
|
|
|
D3
|
|
> 100 until 300 km
|
|
|
0.37870
|
|
|
|
0.25723
|
|
|
|
0.18001
|
|
|
|
0.08671
|
|
|
D4
|
|
> 300 km
|
|
|
0.37909
|
|
|
|
0.25723
|
|
|
|
0.23159
|
|
|
|
0.11563
|
|
2.1.5. The time modulation is defined by the STFC Tariff Regulation provided in the Public system, as
shown in the table below:
|
|
|
|
|
|
|
|
|
Time
|
|
Mondays to Fridays
|
|
Saturdays
|
|
Sundays and Holidays
|
|
From 12am to 6am
|
|
Super-reduced
|
|
Super-reduced
|
|
Super-reduced
|
|
From 6am to 7am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
|
From 7am to 9am
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 9am to 12pm
|
|
Differentiated
|
|
Normal
|
|
Reduced
|
|
From 12pm to 2pm
|
|
Normal
|
|
Normal
|
|
Reduced
|
|
From 2pm to 6pm
|
|
Differentiated
|
|
Reduced
|
|
Reduced
|
|
From 6pm to 9pm
|
|
Normal
|
|
Reduced
|
|
Reduced
|
|
From 9pm to 12am
|
|
Reduced
|
|
Reduced
|
|
Reduced
|
2.1.6. Irrespective of the duration of the call, no additional fee shall be charged on the amounts
defined above.
2.1.7. For national long-distance calls originated in TUP (telephone for public usage) designed for accesses
to the STFC the tariff method based on the usage time will be adopted based on the value of the UTP (VTP), pursuant to the STFC Tariff Regulation provided in the Public system, with the first unit being applied upon answering the call and the
subsequent units at every period in seconds corresponding to (VTP/Dn) x 60, where Dn is the tariff step value in which the related call falls into.
2.2. Calls involving other telecommunications services
2.2.1. The tariff
criteria and procedures involving the Personal Mobile Service (PMS) are those defined in applicable regulation.
2.2.1.1. The
tariff unit is the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds.
2.2.1.2. The
maximum communication minute values involving the PMS (VC-2 and VC-3), taking into account the type of call and pursuant to Act No. 971 of February 9, 2010, are shown in the table below:
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
1.12059
|
|
|
1.27502
|
|
|
|
0.78441
|
|
|
|
0.89251
|
|
The time the reduced tariff will be charged for calls addressed to the PMS will be Mondays to Saturdays
from 12am to 7am and from 9pm to 12am, and on Sundays and Brazilian public holidays from 12am to 12am, pursuant to applicable regulation.
2.2.2. The tariff criteria and procedures involving the Specialized Mobile Service (SMS) are those defined in applicable regulation.
2.2.2.1. The tariff unit is the tenth of minute (six seconds) and the minimum tariff time will be thirty (30) seconds.
2.2.2.2. The maximum communication minute values involving the PMS (VC-2 and VC-3), taking into account the type of call and pursuant to
Act No. 54,687 of December 12, 2005, are shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal Tariff
|
|
|
Reduced Tariff
|
|
|
VC-2
|
|
VC-3
|
|
|
VC-2
|
|
|
VC-3
|
|
|
0.90465
|
|
|
1.02931
|
|
|
|
0.63325
|
|
|
|
0.72051
|
|
2.2.3. For national long-distance calls originated in TUP (telephone for public usage) designed to other
collective interest services, which registration areas are different and do not contain the originating TUP tariff area, the tariff method based on the usage time will be adopted, based on the value of the UTP (VTP) and the communication value in
which the related call falls into.
2.2.4. The tariff criteria and procedures for other telecommunications services of
collective interest are those defined by ANATEL pursuant to applicable regulation.
79
ATTACHMENT No. 3
OPTICAL ROUTES
BRASIL TELECOM S.A.
Sector 18
BLUMENAU (SC) - SÃO BENTO DO SUL - CURITIBA (PR)
FLORIANÓPOLIS (SC) - LAGES - MARCELINO RAMOS
FLORIANÓPOLIS (SC) - TUBARÃO -
TORRES - OSÓRIO
FLORIANÓPOLIS (SC) - ITAJAÍ - GARUVA - CURITIBA (PR)
CHAPECÓ (SC) - FRANCISCO BELTRÃO - CASCAVEL (PR)
BLUMENAU (SC) - FLORIANÓPOLIS (SC)
LAGUNA (SC) - PONTA DA BARRA
FLORIANÓPOLIS (SC) - PAPAGAIO – GAROPABA
Sector 19
CASCAVEL (PR) - DOURADOS - CAMPO GRANDE (MS)
MARINGÁ (PR) - NOVA ANDRADINA - TRÊS LAGOAS (MS)
CASCAVEL (PR) - FRANCISCO BELTRÃO - CHAPECÓ (SC)
CURITIBA (PR) - GURUVA -
ITAJAÍ - FLORIANÓPOLIS (SC)
CURITIBA (PR) - SÃO BENTO DO SUL - BLUMENAU (SC)
CURITIBA (PR) - CASCAVEL - FOZ DO IGUAÇÚ (PR)
MARINGÁ (PR) - PONTA GROSSA - CURITIBA (PR)
TRAVESSIA DO RIO PARANÁ (PR)
Sector 21
CAMPO GRANDE (MS) - RONDONÓPOLIS (MT) - PORTELANDIA (GO)
CAMPO GRANDE (MS) - RONDONÓPOLIS (MT) - CUIABÁ (MT)
TRES LAGOAS (MS) - NOVA
ANDRADINA (MS) - MARINGÁ (PR)
NOVA ANDRADINA (MS) - TRES LAGOAS (MS) - MAURILANDIA (GO)
CAMPO GRANDE (MS) - DOURADOS (MS) - CASCAVEL (PR)
CAMPO GRANDE (MS) - TRES LAGOAS (MS)
CAMPO
GRANDE (MS) - CORUMBÁ (MS)
CAMPO GRANDE (MS) - SIDROLANDIA (MS) - JARDIM (MS)
Sector 23
CUIABÁ
(MT) - MIRASSOL D’OESTE - VILHENA - PORTO VELHO (RO)
CUIABÁ (MT) - RONDONÓPOLIS (MT) - CAMPO GRANDE (MS)
Sector 24
GOIÂNIA
(GO) - MORRINHOS - CATALÃO - BRASÍLIA (DF)
GOIÂNIA (GO)- ANAPOLIS - BRASÍLIA (DF)
MAURILÂNDIA (GO) - TRES LAGOAS - NOVA ANDRADINA (MS)
PORTELÂNDIA (GO) - RONDONÓPOLIS - CAMPO GRANDE (MS)
GOIÂNIA (GO) -
PORTELÂNDIA (GO) - RONDONÓPOLIS (MT)
GOIÂNIA (GO) - ALEXÁNIA - PIRINOPOLIS - BRASÍLIA (DF)
GOIÂNIA (GO) - CERES - PALMAS - ESTREITO (TO)
80
Sector 26
BRASÍLIA (DF)– CATALÃO – MORRINHOS – GOIÂNIA (GO)
BRASÍLIA (DF)– ANÁPOLIS - GOIÂNIA (GO)
BRASÍLIA (DF)– PIRINÓPOLIS – ALEXÂNIA - GOIÂNIA (GO)
Sector 27
PORTO VELHO (RO) - RIO BRANCO (AC)
PORTO VELHO (RO) - VILHENA - MIRASSOL D’OESTE - CUIABÁ (MT)
Sector 28
RIO BRANCO (AC) - PORTO VELHO (RO)
TRAVESSIA DO RIO MADEIRA (AC)
Sector 29
OSORIO (RS) -
TORRES - TUBARÃO - FLORIANÓPOLIS (SC)
MARCELINO RAMOS (RS) - LAGES - FLORIANÓPOLIS (SC)
PORTO ALEGRE (RS) - SANTA MARIA - ROSÁRIO - SANTANA DO LIVRAMENTO (RS)
PORTO ALEGRE (RS) - SANTA MARIA - ROSÁRIO DO SUL - ALEGRETE - URUGUAIANA (RS)
Sector 30
PELOTAS (RS) - SÃO LOURENÇO - PORTO ALEGRE (RS)
81
AGÊNCIA NACIONAL DE TELECOMUNICAÇÕES
EXTRACT OF AGREEMENT PBOA/SPB No. 143/2011 – ANATEL
PARTIES: Agência Nacional de Telecomunicações – ANATEL and BRASIL TELECOM S.A. PURPOSE: Quinquennial amendment of the Concession Agreement for provision of Switch Fixed Telephony
Service (STFC) in the National Long-Distance mode, set forth in Clause 3.2, for the establishment of new conditions and new universalization and quality targets. LEGAL GROUNDS: Federal Law No. 9,472 of July 16, 1997 (General
Telecommunications Law – LGT). SIGNATORIES: For Anatel: RONALDO MOTA SARDENBERG - President and JOÃO BATISTA DE REZENDE – Board member. For Brasil Telecom S.A. - JOÃO DE DEUS PINHEIRO DE MACEDO – Executive Planning
Officer and PAULO TODESCAN LESSA MATTOS – Regulatory Officer and as WITNESSES: CRISTIAN CHARLES MARLOW and JOSÉ ROBERTO PEREIRA NEDER.
RONALDO MOTA SARDENBERG
Chairman of the Board of Directors
82
Exhibit 12.1
Computation of Ratio of Combined Fixed Charges and Preference Dividends to Earnings of
Brasil Telecom S.A. and Tele Norte Leste Participações S.A.
Brasil
Telecom S.A.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-Month Period Ended
June 30,
|
|
Year Ended December 31,
|
|
|
|
2011
|
|
2011
|
|
2010
|
|
2010
|
|
2009
|
|
|
|
Actual
|
|
Pro Forma
|
|
Actual
|
|
Pro Forma
|
|
Actual
|
|
|
|
(in thousands of reais, except ratio)
|
|
Computation of Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income from continuing operations before adjustment for income or loss from equity investees
|
|
|
R$
|
708.086
|
|
|
|
R$
|
1,327,000
|
|
|
|
R$
|
2,379,235
|
|
|
|
R$
|
4,735,000
|
|
|
|
R$
|
(1,357,998
|
)
|
|
Plus
fixed charges
|
|
|
|
254,843
|
|
|
|
|
1,426,726
|
|
|
|
|
483,705
|
|
|
|
|
3,143,036
|
|
|
|
|
359,466
|
|
|
Plus
amortization of capitalized interest
|
|
|
|
4,846
|
|
|
|
|
20,178
|
|
|
|
|
10,587
|
|
|
|
|
27,150
|
|
|
|
|
3,512
|
|
|
Plus
distributed income of equity investees
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Plus
share of pre-tax losses of equity investees for which charges arising from guarantees are included in fixed
charges
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Less
interest capitalized
|
|
|
|
(33,787
|
)
|
|
|
|
(120,385
|
)
|
|
|
|
(45,506
|
)
|
|
|
|
(203,967
|
)
|
|
|
|
(47,220
|
)
|
|
Less
preference security dividend requirements of consolidated subsidiaries
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Less
non-controlling interest in pre-tax income of subsidiaries that have not incurred fixed charges
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earnings
|
|
|
R$
|
933,988
|
|
|
|
R$
|
2,653,519
|
|
|
|
R$
|
2,828,021
|
|
|
|
R$
|
7,701,219
|
|
|
|
R$
|
(1,042,240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computation of fixed charges and preference dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expensed and capitalized
|
|
|
R$
|
254,843
|
|
|
|
R$
|
1,426,726
|
|
|
|
R$
|
483,705
|
|
|
|
R$
|
3,143,036
|
|
|
|
R$
|
359,466
|
|
|
Plus
amortized premiums, discounts and capitalized expenses related to indebtedness
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Plus
estimate of the interest within rental expense
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Plus
preference security requirements of consolidated subsidiaries
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed charges and preference dividends
|
|
|
R$
|
254,843
|
|
|
|
R$
|
1,426,726
|
|
|
|
R$
|
483,705
|
|
|
|
R$
|
3,143,036
|
|
|
|
R$
|
359,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Combined Fixed Charges and Preference Dividends to Earnings
|
|
|
|
3.66x
|
|
|
|
|
1.86x
|
|
|
|
|
5.85x
|
|
|
|
|
2.45x
|
|
|
|
|
(2.90)x
|
|
Tele Norte Leste Participações S.A.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-Month
Period Ended
June 30,
|
|
|
Year Ended December 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(in thousands of reais, except ratio)
|
|
|
Computation of Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income from continuing operations before adjustment for income or loss from equity investees
|
|
R$
|
81,235
|
|
|
R$
|
1,665,687
|
|
|
R$
|
5,420,507
|
|
|
Plus
fixed charges
|
|
|
1,426,726
|
|
|
|
3,143,036
|
|
|
|
2,480,876
|
|
|
Plus
amortization of capitalized interest
|
|
|
20,178
|
|
|
|
27,150
|
|
|
|
11,960
|
|
|
Plus
distributed income of equity investees
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Plus
share of pre-tax losses of equity investees for which charges arising from guarantees are included in fixed
charges
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Less
interest capitalized
|
|
|
(120,385
|
)
|
|
|
(203,967
|
)
|
|
|
(172,013
|
)
|
|
Less
preference security dividend requirements of consolidated subsidiaries
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Less
non-controlling interest in pre-tax income of subsidiaries that have not incurred fixed charges
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earnings
|
|
R$
|
1,407,754
|
|
|
R$
|
4,361,906
|
|
|
R$
|
7,741,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computation of fixed charges and preference dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expensed and capitalized
|
|
R$
|
1,426,726
|
|
|
R$
|
3,143,036
|
|
|
R$
|
2,480,876
|
|
|
Plus
amortized premiums, discounts and capitalized expenses related to indebtedness
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Plus
estimate of the interest within rental expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Plus
preference security requirements of consolidated subsidiaries
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed charges and preference dividends
|
|
R$
|
1,426,726
|
|
|
R$
|
3,143,036
|
|
|
R$
|
2,480,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Combined Fixed Charges and Preference Dividends to Earnings
|
|
|
0.99x
|
|
|
|
1.47x
|
|
|
|
3.12x
|
|
Exhibit 23.1
|
|
|
|
|
|
|
Deloitte Touche Tohmatsu
Av. Presidente
Wilson, 231 – 22º
Rio de Janeiro – RJ – 20030-905
Brasil
Tel: + 55 (21) 3981-0500
Fax:+ 55 (21) 3981-0600
www.deloitte.com.br
|
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement on Form F-4 of our reports dated April 28, 2011, relating to the financial statements of Brasil Telecom S.A., and the
effectiveness of Brasil Telecom S.A.’s internal control over financial reporting, appearing in the Annual Report on Form 20-F/A (Amendment No. 1) of Brasil Telecom S.A. for the year ended December 31, 2010, and to the reference to us under
the heading “Experts” in this Registration Statement.
/s/ Deloitte Touche Tohmatsu Auditores Independentes
Rio de Janeiro, RJ, Brazil
September 1,
2011
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms,
each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
©
Deloitte Touche Tohmatsu. All rights reserved.
Exhibit 23.2
|
|
|
|
|
|
|
Deloitte Touche Tohmatsu
Av. Presidente
Wilson, 231 – 22º
Rio de Janeiro – RJ – 20030-905
Brasil
Tel: + 55 (21) 3981-0500
Fax:+ 55 (21) 3981-0600
www.deloitte.com.br
|
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement on Form F-4 of our reports dated May 2, 2011, relating to the financial statements of Tele Norte Leste
Participações S.A., and the effectiveness of Tele Norte Leste Participações S.A.’s internal control over financial reporting, appearing in the Annual Report on Form 20-F of Tele Norte Leste
Participações S.A. for the year ended December 31, 2010, and to the reference to us under the heading “Experts” in this Registration Statement.
/s/ Deloitte Touche Tohmatsu Auditores Independentes
Rio de Janeiro, RJ, Brazil
September 1, 2011
Deloitte refers to one or more
of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal
structure of Deloitte Touche Tohmatsu Limited and its member firms.
©
Deloitte Touche Tohmatsu. All rights reserved.
Exhibit 23.3
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Tele Norte Leste Participações S.A.
We consent to the use of our report dated March 28, 2011, with respect to the consolidated balance sheet of Tele Norte Leste Participações S.A. and subsidiaries as of January 1, 2009,
incorporated herein by reference and to the reference to our firm, KPMG Auditores Associados (formerly known as BDO Auditores Independentes) under the heading “Experts” in the prospectus.
/s/ KPMG Auditores Associados
Rio de Janeiro,
Brazil
August 29, 2011
Exhibit 23.6
CONSENT OF APSIS CONSULTORIA EMPRESARIAL LTDA.
We hereby consent to the
inclusion of (1) an English-language translation of our Valuation Reports of Market Value of Shareholders’ Equity of Tele Norte Leste Participações S.A. (“TNL”) and Brasil Telecom S.A. (“Brasil Telecom”)
(RJ-0375/11-07), dated August 12, 2011, and delivered to TNL and Brasil Telecom for the specific purposes of Article 264 of Brazilian Corporation Law (the “Market Valuation Report”), and (2) our Valuation Report of Book Value of
Shareholders’ Equity of TNL (RJ-RJ-0375/11-04), dated August 12, 2011, and delivered to TNL and Brasil Telecom for the specific purposes of Articles 8 and 252 of the Brazilian Corporation Law, and any amendments thereto (the “Book
Valuation Report,” and together with the Market Valuation Report, the “Valuation Reports”), as exhibits to the Registration Statement on Form F-4 of Brasil Telecom filed with the U.S. Securities and Exchange Commission relating to the
proposed merger of TNL with and into Brasil Telecom (the “Registration Statement”), and to the references to our firm and the Valuation Reports in the Registration Statement and the prospectus included therein. In giving such consent, we
do not admit and we hereby disclaim that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended (the “Act”), or the rules and regulations of the U.S. Securities and
Exchange Commission thereunder (the “Regulations”), nor do we admit that we are experts with respect to any part of such Registration Statement and the prospectus included therein within the meaning of the term “experts” as used
in the Act or the Regulations.
São Paulo, Brazil, August 31, 2011.
|
|
|
|
|
Apsis Consultoria Empresarial Ltda.
|
|
|
|
|
By
|
|
/s/ Luiz Paulo César Silveira
|
|
Name: Luiz Paulo César Silveira
Title: Director
|
|
|
|
|
By
|
|
/s/ Carlos Magno Antunes Sanches
|
|
Name: Carlos Magno Antunes Sanches
Title: Project Manager
|
Exhibit 23.7
CONSENT OF BANCO ITAÚ BBA S.A.
We hereby consent (1) to the
inclusion of an English-language translation of our presentation of financial analyses, dated as of July 29, 2011 (the “Presentation”), delivered to the Special Committee of Brasil Telecom S.A. as an exhibit to the Registration Statement
on Form F-4 of Brasil Telecom S.A. (the “Company”) filed with the U.S. Securities and Exchange Commission relating to the proposed merger of Tele Norte Leste Participações S.A. with and into the Company (the
“Registration Statement”), and (2) to the references to our firm and the Presentation in the Registration Statement and the prospectus included therein under the captions “Part One—Questions and Answers about the
Merger” and “Part Five—The Merger.” In giving such consent, we do not admit and we hereby disclaim that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as
amended (the “Act”), or the rules and regulations of the U.S. Securities and Exchange Commission thereunder (the “Regulations”), nor do we admit that we are experts with respect to any part of such Registration Statement and the
prospectus included therein within the meaning of the term “experts” as used in the Act or the Regulations.
São Paulo,
Brazil, August 31, 2011.
Banco Itaú BBA S.A.
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By
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/s/ Eduardo Guimarães
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Name: Eduardo Guimarães
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Title: Senior Vice President—Investment Banking Department
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By
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/s/ Fernando Fontes Iunes
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Name: Fernando Fontes Iunes
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Title: Diretor Executivo—Investment Banking Department
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Exhibit 23.8
CONSENT OF BANCO BTG PACTUAL S.A.
We hereby consent (1) to the inclusion
of an English-language translation of our presentation of financial analyses, dated August 1, 2011 (the “Presentation”), delivered to the Special Committee of Tele Norte Leste Participações S.A. as an exhibit to the
Registration Statement on Form F-4 of Brasil Telecom S.A. (the “Company”) filed with the U.S. Securities and Exchange Commission relating to the proposed merger of Tele Norte Leste Participações S.A. with and into the Company
(the “Registration Statement”), and (2) to the references to our firm and the Presentation in the Registration Statement and the prospectus included therein. In giving such consent, we do not admit and we hereby disclaim that we come
within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended (the “Act”), or the rules and regulations of the U.S. Securities and Exchange Commission thereunder (the
“Regulations”), nor do we admit that we are experts with respect to any part of such Registration Statement and the prospectus included therein within the meaning of the term “experts” as used in the Act or the Regulations.
São Paulo, Brazil, August 31, 2011.
Banco BTG Pactual S.A.
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By
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/s/ Bruno Duque Horta Nogueira
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Name:
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Bruno Duque Horta Nogueira
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Title:
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Attorney-in-fact
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By
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/s/ Bruno Amaral
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Name:
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Bruno Amaral
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Title:
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Attorney-in-fact
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Presentation for Brasil Telecom’s Special Independent
Committee
CONFIDENTIAL |
July 29th, 2011
THIS IS A FREE TRANSLATION OF THE MATERIALS PREPARED BY
BANCO ITAÚ
BBA S.A. ON JULY 29
th
, 2011. IN CASE OF ANY
INCONSISTENCIES BETWEEN THIS MATERIAL AND ITS PORTUGUESE
VERSION THE PORTUGUESE VERSION SHALL PREVAIL
Exhibit 99.3
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2
2
Important Notes
MATERIAL LEGAL INFORMATION - in having access to this material, you confirm that you have read the
provisions described below and that you will comply with them:
1. This material refers to an
economic-financial analysis of Brasil Telecom S.A. (“Brasil Telecom”), Tele Norte Leste Participações S.A. (“TNL”), Telemar Norte Leste S.A. (“TMAR”), prepared by Banco
Itaú BBA S.A. (“Itaú BBA”) and used by the temporary special independent committee
constituted by Brasil Telecom in compliance with Legal Opinion (Parecer de Orientação) n° 35, issued by the
Brazilian Securities Commission (Comissão de Valores Mobiliários) (the “CVM”) in
September 1st, 2008 ("CVM Legal Opinion 35" and “Special Independent Committee”, respectively) to: (i) negotiate the
exchange ratio of the shares of TMAR and TNL in the context of its mergers into Brasil Telecom, which
will concentrate all equity interest of TMAR, TNL and Coari Participações S.A. (“Coari”, jointly with
Brasil Telecom, TMAR and TNL, “the Oi Companies”) and will be the only one listed in a stock
exchange market, being referred to as Oi S.A., as duly disclosed to the market by the Oi Companies through
the Material Fact dated May 24, 2011 (“Transaction”); and (ii) submit their recommendations
relative to the Transaction to the Board of Directors of Brasil Telecom,. This material is confidential (except as
otherwise permitted its disclosure as described herein) and may not be used to comply with any legal
or statutory requirements applicable to the Transaction or to the corporate events related to it,
according to Law 6.404/76 (Corporations Law) or to the regulations of the CVM, of the Brazilian
Association of Financial and Capital Market Entities (Associação Brasileira das Entidades dos Mercados
Financeiro e de Capitais), Securities and Exchange Commission, Financial Industry Regulatory Authority
or of any other entity. In addition, we emphasize that the description of the Transaction above and
those contained hereinafter do not attempt to reproduce all details of the Transaction as contained in
the Transaction documents, being understood that we have not had access to all of them, and
therefore, the interested parties, in the event of any doubts in relation to the Transaction, must
seek for access to those documents and/or submit their questions to the responsibles for the Oi Companies.
2. This material is strictly confidential (except as otherwise permitted its disclosure as described
herein) and for the exclusive use of the Special Independent Committee, therefore any kind of disclosure of
the present information or its use for any other purposes without the express consent of Itaú BBA
is prohibited. Thus, it is prohibited the indiscriminate disclosure of the present information or any
information issued by Itaú BBA, including: (i) revealing this information as a presentation in
any shareholders meeting, (ii) including this information in any website or any other kind of disclosure via the
Internet, (iii) disclosing or using the contents of this material in presentations other than
those exclusively addressed to the Special Independent Committee, except if otherwise expressly authorized by
Itaú BBA. Nevertheless, the prohibitions above are not applicable, to the extent strictly
necessary and only in its entirety without modification , to the disclosure of this material to the respective regulatory
capital markets agencies of countries in which Brasil Telecom shares are traded, upon the express
request of such agencies and in compliance with applicable laws and/or rules, as may be determined in
writing by the external legal advisers of Itaú BBA. In addition, this material may be made
available for examination by the Brasil Telecom shareholders, at the headquarters of Brasil Telecom, who have
expressly requested access, being prohibited to reproduce its contents in any way whether
electronically or in handwritten form.
3. Brasil Telecom shall indemnify and keep Itaú
BBA, its directors, officers, employees and/or representatives harmless from and against any and all liability for losses, damage, expenses and legal
claims, which may arise, directly or indirectly, from the compilation and misappropriation of this
material, undertaking to indemnify Itaú BBA for any loss resulting from such use. Itaú BBA does not assume
any liability for any direct or indirect loss, or lost profits eventually resulting therefrom.
4. The information herein contained is based on the information available on or before March
31st, 2011. The information herein contained relative to the financial and accounting situation of Brasil
Telecom, TNL and TMAR is that available on March 31st, 2011 (date of the most recently audited
financial statements). Thus, the disclosure of any information later than the base date above or any
subsequent event may affect the results of this material and its conclusions may materially differ
from the actual results obtained by Brasil Telecom, TNL and TMAR. Itaú BBA will not be responsible at any
time for updating, reviewing or amending this material at any time.
5. This material, including its analyses and conclusions, does not constitute a recommendation or
guidance to the Special Independent Committee, to the Oi Companies or their directors or shareholders,
on how to act in relation to any decision related to the Transaction. Any decision taken by Brasil
Telecom and the recommendations made by the Special Independent Committee will be based on their
own analysis of the risks and benefits involved in the Transaction, not being direct or indirect
responsibility of Itaú BBA. This material was delivered on July 29, 2011.
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3
3
Important Notes (Continued)
6. For the preparation of this material: (i) we used the consolidated financial statements of Brasil
Telecom audited by Deloitte Touche Tohmatsu Auditores Independentes, for the business periods ended
on March 31st, 2011 and December 31st, 2010, of TNL audited by Deloitte, for the business periods ended
on March 31st, 2011 and December 31st, 2010and of TMAR audited by Deloitte Touche
Tohmatsu
Auditores Independentes, for the business periods ended on March 31st, 2011 and December 31st, 2010; (ii) we used other public information on Brasil Telecom, TNL and TMAR, such as
press releases and publications to the market; (iii) we conducted discussions with members of the
management of Brasil Telecom, TNL, TMAR and of the Special Independent Committee of Brasil
Telecom about the business dealings and prospects for Brasil Telecom, TNL and TMAR; (iv) we requested
information relative to business plans, including available capacities, production plans and sales
volumes, processing costs, fixed costs, overhead and administrative expenses, investment plans in
expansion and/or maintenance, data, projections, assumptions and forecasts related to Brasil Telecom,
TNL and TMAR, as well as to their respective operating markets; (v) we examined multiples of
comparable companies, companies with profiles and businesses similar to those developed by Brasil
Telecom, TNL and TMAR and whose shares are traded in a stock exchange; (vi) what concerns to the
liabilities and contingencies of Brasil Telecom, TNL and TMAR, we only considered the amount duly
provisioned in the financial statements of those companies, and we did not consider the possibility of
incorrections or insufficiency nor the effects of any legal actions and/or administrative proceedings
(whether civil, environmental, fiscal, labor, welfare etc.) in progress involving such companies or
that may affect the value of the shares issued by such companies; (vii) we took into consideration other
public information, studies, economic, financial and market reports and researches that we considered
important, including without limitation macroeconomic estimates, product price curves and inputs
projected by industry analysts, reports and presentations on the areas of activity (jointly, the
“Information”).
7. In the course of our work, we assume that the Information is
true, accurate and complete and that no other information, which could have been relevant with respect to our work, was not made
available. In relation to Information about the future, we assume that such Information reflect the
best estimates of the directors of Brasil Telecom, TNL and TMAR currently available relative to the future
performance of Brasil Telecom, TNL and TMAR. In addition, we do not assume any responsibility for
independent evaluations of any Information or assessment of any possible passive supervenience or
active deficiencies, whether or not accounted for (whether or not contingent) of Brasil Telecom, TNL
and TMAR and we have not received any such assessment in this sense. We have not been asked to
conduct (and we did not conduct) any physical inspection of the properties or facilities of Brasil
Telecom, TNL and TMAR. Finally, we have not assessed the solvency or fair value of Brasil Telecom, TNL
and TMAR considering the laws relative to bankruptcy, insolvency or similar matters. We also assume,
according to recommendation of Brasil Telecom, TNL and TMAR, that no material modification
occurred in relation to assets, financial situation, operations' results, businesses and prospects of
Brasil Telecom, TNL and TMAR as of the dates on which the most recent financial statements or other
financial or commercial information relative to Brasil Telecom, TNL and TMAR were made available to
us.
8. Itaú BBA will not make any representation or warranty, whether expressed or
implied, in relation to any information used for the preparation hereof or contained herein. The estimates contained in the
analysis and the resulting variation of any analysis are not indicative of real amounts or indicative
of future results or amounts, which may be more or less favorable than the ones suggested by the
referred analysis. Moreover, the analyses referring to business evaluations and securities do not
constitute assessments or reflect the prices for which the businesses were actually acquired or sold, the
real value of the shares when issued in a transaction or the prices for which the securities may be
negotiated at any time. In the event any of the premises mentioned does not occur or if, in any way, the
Information proves to be incorrect, incomplete or innaccurate, the conclusions may be substantially
different than those contained herein. In addition, in the cases in which the analysis of Itaú BBA was
prepared based on the cash flow methodology, Itaú BBA (i) assumed a macroeconomic scenario as
compiled and published by the Brazilian Central Bank (Banco Central do Brasil), which may be
substantially different from future results, (ii) relied on operating assumptions provided by Brasil
Telecom and information provided by the management of Brasil Telecom, TNL and TMAR, which include
information on the respective business plans of Brasil Telecom, TNL and TMAR, available capabilities,
production plans and sales volumes, processing costs, fixed costs, overhead and administrative
expenses and investment plans in expansion and/or maintenance, among others; (iii) analyzed such
information in light of its business knowledge and based on external independent references; whereas
such references include press releases and presentations to the market of Brasil Telecom, TNL and
TMAR, market macroeconomic estimates, price curves of products and inputs prepared by industry
analysts, reports and presentations about the sectors of activity and similar companies, among others;
(iv) considered the value of the shares traded in liquid markets, such as market value in exchanges
relative to sales, profit, generation of cash from operations, EBITDA, among others; and (v) also
considered in its analyses certain points of view shared by its macroeconomic research team and the
telecommunications sector. Given that the analysis and the amounts are based on forecasts of future
results, they are not necessarily indicative of the real and future financial results of Brasil Telecom,
TNL and TMAR, which may be significantly more or less favorable than the ones suggested in this
material. Moreover, given that these analyses are intrinsically subject to uncertainties, and are based on
several events and factors which are out of the control of Itaú BBA and of Brasil Telecom, TNL
and TMAR, Itaú BBA will not be held accountable in any way if the results of Brasil Telecom, TNL and TMAR
differ substantially from the results shown in this material. Therefore, there is no guarantee that
the future results of Brasil Telecom, TNL and TMAR will correspond to the financial projections on which
Itaú BBA based its analysis, and that the differences between the projections used and the
financial results of Brasil Telecom, TNL and TMAR will be relevant. The future results of Brasil Telecom, TNL
and TMAR may also be affected by the economic and market conditions. The preparation of this material
is in no way an obligation of result from Itaú BBA.
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4
4
Important Notes (Continued)
9. We do not assume any responsibility relative to issues concerning (i) the verification of the good
standing of the agreements executed by Brasil Telecom, TNL and TMAR; (ii) the relationship between
Brasil Telecom, TNL and TMAR and third parties and/or other companies of its economic group, including
the financial economic conditions of any agreements executed or any other kind of economic
relationship between Brasil Telecom, TNL and TMAR and third parties and/or with other companies of its
economic group, including past or future economic conditions; and (iii) the maintenance of the
current terms of the existing agreements executed by Brasil Telecom, TNL and TMAR. We emphasize that
the conclusions of this material consider the regular standing of all agreements executed by
Brasil Telecom, TNL and TMAR with third parties and/or with other companies of the same economic
group. If such agreements become subject of litigation, are discontinued, terminated and/or if in any
way they no longer generate results for Brasil Telecom, TNL and TMAR, in full or in part, the
conclusions herein described may be, and probably would be, materially affected and different from the actual
results realized by Brasil Telecom, TNL and TMAR. We understand that Brasil Telecom, TNL and TMAR was
advised by legal counsels to confirm the legitimacy, effectiveness and validity of such
agreements and had audits conducted by specialized companies in providing such confirmations.
10. The preparation of a financial analysis is a complex process that involves several definitions
about the most adequate and pertinent financial analysis methods as well as the implementation of such
methods. We reached a final conclusion based on the results of the analysis performed by us as a
whole, and we did not reach any conclusions based on or related to any of the factors or methods used
in our analysis taken individually. Therefore, we believe our analysis must be considered as a whole
and that the examination of parts or our analysis and specific factors without considering the full
context of our analysis and conclusions may lead to incomplete and incorrect interpretations of the
processes used in our analyses and conclusions.
11. This material provides only an
estimate of the value, according to our criteria, derived from the application of assessment methods used in financial evaluations of companies, which do not assess any
other aspect or implication of the Transaction or any contract, agreement or understanding entered
into in connection with the Transaction. We do not express any opinion on the value for which the
shares related to the Transaction could be traded at any time. In addition, this material is not and
must not be used as: (i) a fairness opinion about the Transaction or an expert opinion, (ii) a voting
recommendation to the shareholders or directors of the Oi Companies or relative to any aspects of the
Transaction, (iii) an opinion on the fairness or a recommendation relative to the exchange ratio of the
shares issued by Brasil Telecom, TNL, TMAR and Coari in the event of one or more mergers resulting
from the Transaction, (iv) an opinion on the value of the Oi Companies shares, at any time, (v) a
recommendation on how the members of the Special Independent Committee must act, vote or issue their
recommendations subject to the CVM Legal Opinion 35. Additionally, this material is not about
the strategy and commercial merits of the Transaction, nor about the possible strategic or commercial
decision of the Oi Companies to conduct the Transaction. The conclusions herein provided refer
exclusively to the Transaction and do not apply to any other decision or operation, present or future,
relative to the Oi Companies, to the economic group of which they are part or to the industry where
they operate. This material does not constitute a judgment, opinion or recommendation to the
management of the Oi Companies and to the Special Independent Committee or to any third party about the
advisability and opportunity of the Transaction, and it also does not endorse any investment
decision.
12. We are not an accounting firm and we do not provide accounting or auditing
services about this Transaction. In the preparation of this material we did not take into account (i) the tax effects resulting
from the Transaction; (ii) the impact of any commissions and expenses that may result from the
Transaction; and (iii) the future accounting impact resulting from the Transaction.
13. This
material is necessarily based on information provided to us on or before the date hereof and takes into account economic and market conditions and other conditions as they currently are and as
they can be assessed on this date. Although future events and other developments may affect the
conclusions provided herein, we have no obligation whatsoever to update, review, rectify or revoke this
material, in full or in part, as a result of any subsequent development or for any other reason.
14. Our examination does not include any operating, tax or any other benefits or losses,
including possible spread, nor any synergies, additional value and/or costs, if any, as of the closing of the
Transaction, if effected, or any other operation. Our analysis is not and must not be considered a
recommendation regarding how the Special Independent Committee or the shareholders and directors of
the Oi Companies should vote or act in relation to the Transaction. We were not invited to
participate, and we shall not participate in the negotiations or in the structuring of the Transaction.
15. We and our affiliates provide a variety of financial services and other services related to
securities, brokerage and investment banking. In the normal course of our activities, we may acquire, hold or
sell, on our behalf or on the behalf of our clients, shares, debt instruments and other securities and
financial instruments (including bank loans and other obligations) of Brasil Telecom, TNL, TMAR and
Coari, and of any other companies that may be involved in the Transaction, as well as provide
investment banking and other financial services to such companies, their controlling and controlled
shareholders.
16. Brasil Telecom agreed to reimburse our expenses and to indemnify us and certain other persons as a
result of the contracting of our services. We shall receive a commission regarding the preparation
of this material, regardless of the closing of the Transaction.
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5
5
Important Notes (Continued)
17. We maintain a strong commercial relationship with the companies controlled by Telemar
Participações S.A., including the Oi Companies, which were, are or may become clients of the Itaú Unibanco
conglomerate (to which we belong) in the most different areas related to financial operations,
provision of services and other activities carried out by the Itaú Unibanco conglomerate, such as, for example,
credit and investment banking operations. Such services are provided in the normal course of
activities of the Itaú Unibanco conglomerate in regular terms and generally available, for which we have
been, are and will be compensated. Additionally, we note that a member of the Special Independent
Committee is also a member of the Fiscal Board (Conselho Fiscal) of Itaú Unibanco Holding S.A., the
controller of Itaú BBA.
18. The professionals in the research departments of the Itaú Unibanco Group, including Itaú
BBA, may base their analyses and publications on different operational and market assumptions and on
different analysis methodologies as compared to those used in the preparation of this material, with
the result that the research reports and other publications prepared by them may contain different
results and conclusions when compared with those herein provided. We adopted policies and procedures
to preserve the independence of analysts of securities, who may have points of view different
from those of our investment banking department. We also adopted policies and procedures for
preserving the independence between investment banking and other areas and departments of Itaú BBA
and other companies of the Itaú Unibanco Group, including, but not limited to asset management
and the proprietary desk for trading shares, debt instruments, securities and other financial instruments.
19. We do not render any accounting, auditing, legal or tax services relative to this material.
20. The financial calculation contained in this material may not always result in an exact
number due to rounding.
21. This material is an intellectual property of Itaú
BBA.
22. This material was not compiled and must not be used for the purposes of article
4th, paragraph 4th or of articles 8th, 227 or 252 of Law 6.404 of December 15, 1976, as amended, in accordance with
CVM Instruction no. 319 or regulations of the SEC, and/or to confirm the value of asset conversion
and/or exchange ratios that may be established in the context of the Transaction.
23. This
material is a free translation of the original version produced in Portuguese.
Banco Itaú
BBA S.A.
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6
6
Table of Contents
SECTION 1
Executive Summary
SECTION 2
Valuation of the Companies
2A
Market Metrics
2B
Trading Multiples
2C
Discounted Cash Flow
APPENDIX A
Information about Itaú
BBA
APPENDIX B
Summary Description of the Transaction
APPENDIX C
Discounted Cash Flow Assumptions
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SECTION 1
Executive Summary
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8
8
Valuation Methodology and Main Assumptions
The estimated value ranges of Brasil Telecom S.A. (“BRT”), Telemar Norte Leste S.A.
(“TMAR”)
and Tele Norte Leste Participações S.A. (“TNLP”) and
resulting exchange ratio ranges were
calculated according to the most widely used methodologies
in financial economic valuation
Methodologies analyzed
Market Metrics
We analyzed the price of the BRT, TMAR and TNLP shares based on different periods during the year of
2010 and
2011, as well as the implicit exchange ratio, based on simple and weighted
averages
We also analyzed the research analysts target price for BRT, TMAR and TNLP
It is worth mentioning that BRT research coverage is limited
Trading Multiples
We
analyzed
EV/EBITDA
market
multiples
for
a
selected
comparable
sample
National Comparables
International Comparables
Discounted Cash Flow
Discounted
Cash
Flow
based
on
the
projections
provided
by
the
Oi
Companies
Unlevered cash flow methodology discounted by the company estimated weighted average cost of capital
(“WACC”)
Valuation base date: March 31st, 2011
WACC estimated at 7.7% in nominal US$
Projections provided in nominal R$ converted into US$ according to the average exchange rate
projected
Projection horizon provided from 2011 to 2020
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9
9
Summary of Exchange Ratios
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10
10
Summary of Exchange Ratios (cont’d)
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11
11
83.1%
82.8%
85.5%
83.6%
83.0%
84.8%
84.5%
85.6%
83.9%
Market Price
Average
Research Target
Price
Trading Multiples
DCF
Material Fact
Spot
15.5%
16.9%
24.7%
15.3%
16.6%
18.3%
18.3%
25.2%
16.9%
Market Price
Average
Research Target
Price
Trading Multiples
DCF
Material Fact
Spot
“Nova Oi”
Resulting Structure
Interest of BRT Minority Shareholders in the Total
Capital
8,9,10
1
2
3
Interest of the Minority Shareholders in the Total
Capital
7,8,9,10
4
5
3
4
5
11
2
6
6
Notes:
1
Based on the weighted average of 180 days up to the material fact (min)
2
Based on the simple average of 30 days up to July, 19
th
(max)
3
Based on the average target prices from the research analysts. Considering the exchange ratio of the
material fact for TMAR3/BRTO3
4
Based on the minimum and maximum range of multiples EV/EBITDA 2011E
5
WACC range of 7.2% to 8.2% and 1.8% to 2.8% growth in perpetuity
6
Based on the closing prices on July 19
th
, 2011
7
All shareholders stake except for TMAR Part. Includes LF Tel S.A., La Fonte Telecom, Andrade Gutierrez,
AG Telecom Part. S.A. and Portugal Telecom stakes outside of TMAR Part.
8
The resulting structures consider payment of R$2.54 per share in BRT
9
Does not consider treasury stocks and is net of equity stakes within the group
10
Considering the conversion of non-voting shares into voting shares so to comply with the legal
limit
11 Based on the weighted average of 60 days up to the material
fact
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12
12
“Nova Oi”
Resulting Structure (cont’d)
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13
13
15.5%
17.2%
14.4%
16.1%
17.0%
15.2%
16.9%
14.5%
16.4%
Market Price
Average
Research Target
Price
Trading Multiples
DCF
Material Fact
Spot
49.9%
50.3%
47.1%
49.3%
51.0%
49.7%
51.7%
2
47.3%
49.7%
Market Price
Average
Research Target
Price
Trading Multiples
DCF
Material Fact
Spot
“Nova Oi”
Resulting Structure (cont’d)
TMAR Part. Interest in Voting Shares (assuming the
exchange of shares between TMAR Part. and its
Controlling Shareholders)
8,9,10,11
Notes:
1
Based on the weighted average of 30 days up to July
19
th
(min)
2
Based on the weighted average of 180 days up to the material fact (max)
3
Based on the average target prices from the research analysts. Considering the
exchange ratio of the material fact for TMAR3/BRTO3
4
Based on the minimum and maximum range of multiples EV/EBITDA 2011E
5
WACC range of 7.2% to 8.2% and 1.8% to 2.8% growth in perpetuity
6
Based on the closing prices on July 19
th
, 2011
7
Based
on
the
simple
average
of
30
days
up
to
July
19
th
(min)
8
Assuming the exchange of all of the 13.1 million TMAR non-voting shares held by
TMAR Part. for TNL voting shares held by the TMAR Part. shareholders. After the exchange, the TMAR Part.
controlling shareholders will still hold a significant number of
Oi voting shares outside of TMAR Part.
9
The
resulting
structures
consider
payment
of
R$2.54
per
share
in
BRT
10
Does not consider treasury stocks and is net of equity stakes within the group
11
Considering the conversion of non-voting shares into voting shares so to comply
with the legal limit
1
3
TMAR Part. Interest in the Total Capital
9,10,11
4
5
3
4
5
7
2
6
6
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SECTION 2
Valuation of the Companies
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SECTION 2A
Market Metrics
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16
16
103
120
64
85
97
96
96
123
40
60
80
100
120
140
160
Jul-10
Aug-10
Sep-10
Oct-10
Dec-10
Jan-11
Feb-11
Apr-11
May-11
Jun-11
BRTO3
BRTO4
TNLP3
TNLP4
TMAR3
TMAR5
IBOV
ITEL
Recent Market Performance of the Oi Companies
Source:
Bloomberg
on
July
19
th
,
2011
Note:
1 Based on closing prices
Performance of the Shares (basis 100 = 01/Jul/2010)
¹
Announcement of
the agreement
with Portugal
Telecom
Conclusion of
capital
increases
Announcement
of the group
restructuring
Three recent events affected significantly the value of the shares of the Oi
Companies
Trading Volume
(90 days Average)
R$ mm
BRTO3:
1.6
BRTO4:
13.6
TNLP3:
8.2
TNLP4:
31.8
TMAR3:
0.04
TMAR5:
7.4
|
|
|
|
17
17
Exchange
Ratio:
Market
Metrics
–
Simple
Average
1
Average Price of the Companies Shares (R$/share)
A) 30 days
Average
B) 60 days
Average
C) 90 days
Average
D) 120 days
Average
E) 180 days
Average
BRTO3
BRTO4
TNLP3
TNLP4
TMAR3
TMAR5
Source: Economática
Notes:
1
Considering
the
periods
up
to
May
23
rd
,
2011
2
Considering the deduction of the Brasil Telecom bonus of R$2.54 per share
3
Voting shares
Reference
date
May
23
rd
,
2011
A) 30 days
Average
B) 60 days
Average
C) 90 days
Average
D) 120 days
Average
E) 180 days
Average
TNLP3/BRTO3
TNLP4/BRTO4
TNLP4/BRTO3
TMAR3/BRTO3
TMAR5/BRTO4
TMAR5/BRTO3
% shareholders
BRT
% minority
Total
% of TMAR
Part. ON
³
Resulting
Exchange
Ratio
2
16.89
14.92
32.64
26.43
73.13
54.75
17.18
14.86
34.43
27.18
72.52
55.40
16.90
14.16
34.12
26.66
71.70
53.19
16.82
13.79
34.39
26.40
69.97
52.12
16.08
13.11
33.71
25.68
64.00
50.28
2.2755
2.1347
1.8423
5.0983
4.4228
3.8170
2.3517
2.2072
1.8564
4.9528
4.4992
3.7839
2.3757
2.2955
1.8564
4.9929
4.5796
3.7036
2.4086
2.3466
1.8492
4.9012
4.6330
3.6509
2.4906
2.4290
1.8968
4.7275
4.7566
3.7144
17.0%
83.3%
50.5%
16.6%
83.2%
50.8%
16.3%
83.3%
51.1%
16.1%
83.3%
51.3%
15.7%
83.2%
51.5%
|
|
|
|
18
18
A) 30 days
Average
B) 60 days
Average
C) 90 days
Average
D) 120 days
Average
E) 180 days
Average
TNLP3/BRTO3
TNLP4/BRTO4
TNLP4/BRTO3
TMAR3/BRTO3
TMAR5/BRTO4
TMAR5/BRTO3
% shareholders
BRT
% minority
Total
% of TMAR
Part. ON
³
Exchange
Ratio:
Market
Metrics
–
Weighted
Average
1
Average Price of the Companies Shares (R$/share)
A) 30 days
Average
B) 60 days
Average
C) 90 days
Average
D) 120 days
Average
E) 180 days
Average
BRTO3
BRTO4
TNLP3
TNLP4
TMAR3
TMAR5
Source: Economática
Notes:
1
Weighted
average
by
the
trading
volume.
Considering
the
periods
up
to
May
23
rd
,
2011
2
Considering the deduction of the Brasil Telecom bonus of R$2.54 per share
3
Voting shares
Reference
date
May
23
rd
,
2011
Resulting
Exchange
Ratio
2
2.3122
2.1428
1.8581
5.1149
4.4537
3.8620
2.3857
2.2004
1.8454
4.7985
4.5311
3.8002
2.3925
2.2807
1.8465
4.8671
4.5934
3.7188
2.4140
2.3243
1.8402
4.8201
4.6340
3.6690
2.5373
2.4687
1.9204
4.3352
4.8565
3.7779
16.78
14.89
32.91
26.45
72.80
54.97
17.25
14.88
35.10
27.15
70.59
55.91
17.00
14.25
34.60
26.70
70.38
53.78
16.92
13.92
34.70
26.45
69.28
52.74
15.97
12.99
34.07
25.78
58.20
50.72
16.9%
83.2%
50.6%
16.6%
83.1%
51.0%
16.3%
83.2%
51.2%
16.2%
83.3%
51.3%
15.5%
83.2%
51.7%
|
|
|
|
19
19
A) 30 days
Average
B) 60 days
Average
C) 90 days
Average
D) 120 days
Average
E) 180 days
Average
TNLP3/BRTO3
TNLP4/BRTO4
TNLP4/BRTO3
TMAR3/BRTO3
TMAR5/BRTO4
TMAR5/BRTO3
% shareholders
BRT
% minority
Total
% of TMAR
Part. ON
³
Exchange
Ratio:
Market
Metrics
–
Simple
Average
1
Average Price of the Companies Shares (R$/share)
A) 30 days
Average
B) 60 days
Average
C) 90 days
Average
D) 120 days
Average
E) 180 days
Average
BRTO3
BRTO4
TNLP3
TNLP4
TMAR3
TMAR5
Source: Economática
Notes:
1
Considering
the
periods
up
to
July
19
th
,
2011
2
Considering the deduction of the Brasil Telecom bonus of R$2.54 per share
3
Voting shares
Reference
date
July
19
th
,
2011
Resulting
Exchange
Ratio
2
1.9198
2.0079
1.7240
4.4297
4.2075
3.6126
2.0413
2.0400
1.7952
4.6449
4.2476
3.7379
2.1230
2.0744
1.8122
4.8583
4.3072
3.7628
2.1999
2.1326
1.8267
4.8727
4.3832
3.7543
2.3699
2.2450
1.8948
4.9902
4.5022
3.7999
18.3%
84.5%
50.0%
17.9%
84.1%
50.0%
17.5%
83.8%
50.2%
17.2%
83.6%
50.5%
16.5%
83.2%
50.8%
16.25
14.31
26.31
23.62
60.70
49.50
16.61
14.92
28.72
25.26
65.35
52.59
16.72
14.93
30.10
25.69
68.88
53.35
16.88
14.83
31.55
26.20
69.88
53.84
16.26
14.12
32.51
26.00
68.46
52.13
|
|
|
|
20
20
A) 30 days
Average
B) 60 days
Average
C) 90 days
Average
D) 120 days
Average
E) 180 days
Average
TNLP3/BRTO3
TNLP4/BRTO4
TNLP4/BRTO3
TMAR3/BRTO3
TMAR5/BRTO4
TMAR5/BRTO3
% shareholders
BRT
% minority
Total
% of TMAR
Part. ON
Exchange
Ratio:
Market
Metrics
–
Weighted
Average
1
Average Price of the Companies Shares (R$/share)
A) 30 days
Average
B) 60 days
Average
C) 90 days
Average
D) 120 days
Average
E) 180 days
Average
BRTO3
BRTO4
TNLP3
TNLP4
TMAR3
TMAR5
Source: Economática
Notes:
1
Weighted
average
by
the
trading
volume.
Considering
the
periods
up
to
July
19
th
,
2011
2
Considering the deduction of the Brasil Telecom bonus of R$2.54 per share
3
Voting shares
Resulting
Exchange
Ratio
2
Reference
date
July
19
th
,
2011
1.9459
2.0170
1.7458
4.4440
4.1639
3.6041
2.0728
2.1051
1.8794
4.6070
4.2869
3.8273
2.1928
2.1185
1.8762
4.6652
4.3412
3.8446
2.2747
2.1681
1.8622
4.6748
4.4355
3.8098
2.3351
2.2482
1.8584
4.6965
4.4942
3.7149
18.2%
84.4%
49.9%
17.6%
84.1%
49.9%
17.2%
83.6%
50.2%
16.9%
83.4%
50.6%
16.6%
83.4%
50.9%
16.14
14.32
26.47
23.74
60.44
49.02
16.73
15.21
29.40
26.66
65.34
54.28
16.75
15.12
31.15
26.65
66.26
54.61
16.96
14.93
32.80
26.85
67.41
54.94
16.82
14.34
33.34
26.53
67.05
53.03
3
|
|
|
|
21
21
18.30
18.00
84.82
75.30
75.00
71.00
64.83
59.00
56.00
55.85
47.00
36.00
35.20
35.00
35.00
33.00
31.00
30.00
50.00
46.00
45.00
41.00
28.50
82.8%
Exchange
Ratio:
Market
Metrics
–
Research
Target
Price
Target Price of TNLP3 (R$/share)
Target Price of TNLP4 (R$/share)
Target Price of TMAR5 (R$/share)
Target Price of Brasil Telecom (R$/share)
Average: 42.10
Average: 33.60
Average: 65.42
BRTO3
BRTO4
Average: 18.15
Resulting Exchange Ratio
¹
2.4117
Average
2.1529
1.9248
n/a
4.1919
3.7477
TNLP3/BRTO3
TNLP4/BRTO4
TNLP4/BRTO3
TMAR3/BRTO3
TMAR5/BRTO4
TMAR5/BRTO3
Source: Bloomberg
Note:
1
Considering the deduction of the Brasil Telecom bonus of R$2.54 per share
16.9%
% shareholders
BRT
% minority
Total
% of TMAR
Part. ON
50.3%
19/Jan/2011
29/Mar/2011
12/Jan/2011
30/Jul/2010
15/Jun/2011
25/May/2011
20/Jun/2011
12/Jan/2011
13/Dec/2010
24/May/2011
13/Apr/2011
24/May/2011
10/Nov/09
19/Jan/11
26/Jan/11
16/Jun/11
25/Mar/11
24/Aug/11
25/Apr/11
14/Apr/11
15/Jun/11
13/May/2009
07/Jun/2011
25/Mar/2011
20.00
|
|
|
|
SECTION 2B
Trading Multiples
|
|
|
|
23
23
Company
Country
Price per Share
Market Cap
EV
EV / EBITDA
P / E
(USD)
(USD mm)
(USD mm)
2011E
2012E
2011E
2012E
National
Telesp
29,22
32.879
33.810
4,5x
4,3x
9,9x
9,2x
TIM
5,63
12.479
13.464
4,7x
4,2x
17,4x
13,3x
Average
4,6x
4,2x
13,6x
11,3x
Min
4,5x
4,2x
9,9x
9,2x
Max
4,7x
4,3x
17,4x
13,3x
International
Bharti Airtel Ltd.
8,94
33.935
48.070
9,1x
7,4x
23,7x
15,3x
Reliance Communications Ltd.
2,14
4.418
11.808
7,2x
6,4x
15,6x
11,0x
China Telecom Corp. Ltd.
0,67
53.996
61.049
5,9x
5,6x
18,8x
16,0x
America Movil S.A.B. de C.V.
1,28
100.802
124.452
5,6x
5,4x
11,8x
11,0x
Portugal Telecom SGPS SA
8,43
7.387
19.266
6,2x
5,6x
9,1x
8,3x
France Telecom
19,55
51.759
100.103
4,5x
4,6x
8,3x
8,5x
Vodafone Group plc
2,56
130.577
181.334
7,6x
7,6x
9,7x
9,6x
Deutsche Telekom AG
14,67
63.071
132.514
5,4x
5,5x
14,8x
14,0x
Telefonica, S.A.
22,00
99.208
183.517
5,6x
5,5x
9,2x
8,9x
BT Group plc
3,11
23.941
39.264
4,2x
4,4x
9,5x
11,1x
Royal KPN N.V.
13,25
19.595
36.113
5,0x
5,0x
7,8x
7,7x
Swisscom AG
458,83
23.764
34.657
6,1x
6,1x
10,0x
9,8x
TeliaSonera AB
6,95
30.077
38.203
7,3x
7,0x
9,9x
9,2x
Average
6,1x
5,8x
12,2x
10,8x
Min
4,2x
4,4x
7,8x
7,7x
Max
9,1x
7,6x
23,7x
16,0x
Multiples
of
the
Oi
Group
Companies
Tele Norte Leste Participacoes S.A.
14,16
6.622
24.780
4,4x
4,2x
8,3x
7,3x
Telemar Norte Leste S.A.
28,58
9.835
23.280
3,8x
3,5x
12,0x
7,6x
Brasil Telecom S.A.
8,53
5.031
4.538
2,2x
2,2x
5,0x
5,2x
Multiples
of
the
Oi
Group
Companies
@
Material
Fact
Date
Tele Norte Leste Participacoes S.A.
Trading Multiples
Source:
Bloomberg,
Capital
IQ
and
Companies
Reports
on
July
19
th
,
2011
Notes:
1
Not including NET due to low liquidity of the shares
2
Multiples of the Oi Group Companies calculated based on the price of non-voting
shares and market projections
1
2
2
16,12
7.534
26.008
4,6x
4,4x
9,8x
8,6x
Telemar Norte Leste S.A.
33,65
11.578
25.505
4,1x
3,8x
14,7x
9,3x
Brasil Telecom S.A.
9,35
5.516
5.254
2,6x
2,6x
5,7x
5,9x
|
|
|
|
24
24
TMAR Stake Value
Net Debt and Provisions /
Deposits
TNLP Equity Value
Value per Share (R$)
Minimum
14,300
1,377
12,923
27.64
Maximum
15,098
1,377
13,721
29.35
EV/EBITDA
2011E
EBITDA 2011E
Stand-Alone
EV Stand-
Alone
Net Debt and
Provisions /
Deposits
Equity Value
Stand-Alone
BRT Stake
Value
PT Stake Value
Total TMAR
Equity Value
Value per
Share (R$)
Minimum
4.5x
6,420
29,126
16,091
13,034
6,930
348
20,312
59.04
Maximum
4.7x
6,420
30,051
16,091
13,960
7,139
348
21,446
62.33
EV/EBITDA 2011E
EBITDA 2011E
Enterprise Value
Net Debt and
¹
Provisions / Deposits
Equity Value
Value per Share (R$)
Minimum
4.5x
2,938
13,329
(734)
14,063
23.84
Maximum
4.7x
2,938
13,752
(734)
14,486
24.56
Minimum
Maximum
Exchange Ratio: Trading Multiples
Source: Oi
Notes:
1
On March 31st, 2011
2
Based on the total of 589.8 million shares
3
Stand
alone
on
March
31
st
,
2011
4
Based on interest of 49.28% in BRT
5
Based on interest of 3% (held on 31/Mar) in Portugal Telecom (Portugal Telecom
market cap of R$11.6 billion)
6
Based on the total of 344.1 million shares
7
Based on interest of 70.40% in Telemar Norte Leste
8
On
March
31
st
,
2011
9
Based on the total of 467.5 million shares
10
Considering the deduction of the Brasil Telecom bonus of R$2.54 per share
Valuation of Brasil Telecom
(R$ million, except otherwise
mentioned)
2
Valuation of Telemar Norte Leste
(R$ million, except otherwise
mentioned)
Valuation of Tele Norte Leste Participações
(R$ million, except otherwise mentioned)
3
4
5
7
8
9
Resulting
Exchange
Ratio
10
2
8
1.2978
1.3331
TNLP/BRTO
Blended Exchange Ratio
2.7716
2.8310
TMAR/BRTO
Blended Exchange Ratio
6
% BRT shareholders
% Minority Total
25.2%
85.6%
24.7%
85.5%
% of TMAR Part. in voting
shares
47.1%
47.3%
|
|
|
|
SECTION 2C
Discounted Cash Flow
|
|
|
|
26
26
Discount Rate –
Weighted Average Cost of Capital (WACC)
The
discount
rate
used
for
the
Oi
Companies
was
estimated
by
the
Capital
Asset
Pricing
Model
(“CAPM”)
methodology,
resulting
in
7.7%
in
US$
in
nominal
terms
Notes:
1
Based
on
the
average
of
the
last
3
months
of
the
YTM
of
the
American
Treasury
30
year
Bond
–
Source:
Bloomberg
2
Based
on
the
average
of
the
last
3
months
of
EMBI
Brazil
index
–
Source:
Bloomberg
3
Based
on
the
arithmetic
average
of
the
historical
difference
between
the
S&P
returns
and
the
American
Treasury
bonds
(1933
–
2009)
–
Source:
Ibbotson
Associates’
Stocks,
Bonds,
Bills
and
Inflation 2010 Yearbook
4
Based
on
the
average
of
the
adjusted
betas
of
the
comparable
companies.
The
following
companies
were
considered
in
the
calculation
of
the
beta
coefficient:
Telesp,
Tim,
Tele
Norte
Leste
Participações,
Telemar
Norte
Leste
and
Brasil
Telecom
-
Source:
Bloomberg
5
Oi
long
term
marginal
cost
of
debt
in
US$
based
on
the
YTM
of
the
bond
maturing
in
October
2020
6
Based
on
the
IR
and
CSSL
rate
7
Assuming
that
the
current
capital
structure
of
the
company
already
represents
the
appropriate
target
capital
structure
Cost of Equity
Market risk
premium
7.5%
3
Risk-free rate
4.3%
1
Cost of Equity
(US$ in nominal terms)
13.1%
Beta
0.95
4
Brazilian country
risk
1.7%
2
Effective Tax Rate
34.00%
6
Cost of Debt
Cost of debt
before taxes
5.9%
5
Cost of debt after taxes
(US$)
3.9%
Nominal WACC
US$
7.7%
41.5%
7
58.5%
7
|
|
|
|
27
27
Discounted Cash Flow –
Brasil Telecom
We valued Brasil Telecom discounting the Free Cash Flow to the Firm
|
|
|
|
28
28
Discounted Cash Flow –
Telemar Norte Leste
We valued Telemar Norte Leste discounting the Free Cash Flow to the Firm
|
|
|
|
29
29
Discounted Cash Flow –
Tele Norte Leste Participações
Due
to
its
activities
as
holding,
Tele
Norte
Leste
has
operating
expenses
that
were
projected
and
discounted
to
present
value.
Most
of
the
value
of
Tele
Norte
Leste
comes
from
its
interest
in
Telemar Norte Leste
|
|
|
|
30
30
Sensitivity Analysis
BRT
share price (R$)
TMAR
share price (R$)
TNLP
share price (R$)
BRT
Equity Value (R$ mm)
TMAR
Equity Value (R$ mm)
TNLP
Equity Value (R$ mm)
WACC (%)
WACC (%)
WACC (%)
WACC (%)
WACC (%)
WACC (%)
#####
8.7%
8.2%
7.7%
7.2%
6.7%
3.3%
15,276
16,781
18,630
20,955
23,964
2.8%
14,468
15,768
17,336
19,263
21,687
2.3%
13,785
14,926
16,281
17,916
19,925
1.8%
13,201
14,215
15,405
16,817
18,521
1.3%
12,696
13,607
14,664
15,904
17,377
#####
8.7%
8.2%
7.7%
7.2%
6.7%
3.3%
36,995
42,381
48,993
57,302
68,053
2.8%
34,110
38,766
44,377
51,268
59,929
2.3%
31,675
35,762
40,613
46,461
53,643
1.8%
29,591
33,226
37,485
42,540
48,635
1.3%
27,788
31,057
34,844
39,282
44,551
#####
8.7%
8.2%
7.7%
7.2%
6.7%
3.3%
24,588
28,371
33,016
38,854
46,407
2.8%
22,561
25,832
29,773
34,615
40,699
2.3%
20,849
23,721
27,129
31,237
36,283
1.8%
19,385
21,940
24,932
28,483
32,765
1.3%
18,119
20,415
23,076
26,194
29,896
28
8.7%
8.2%
7.7%
7.2%
6.7%
3.3%
25.90
28.45
31.59
35.53
40.63
2.8%
24.53
26.74
29.39
32.66
36.77
2.3%
23.37
25.31
27.61
30.38
33.78
1.8%
22.38
24.10
26.12
28.51
31.40
1.3%
21.53
23.07
24.86
26.97
29.46
118
8.7%
8.2%
7.7%
7.2%
6.7%
3.3%
107.53
123.18
142.40
166.55
197.79
2.8%
99.14
112.67
128.98
149.01
174.18
2.3%
92.06
103.94
118.04
135.04
155.91
1.8%
86.01
96.57
108.95
123.64
141.36
1.3%
80.77
90.27
101.27
114.17
129.49
1,021
8.7%
8.2%
7.7%
7.2%
6.7%
3.3%
52.60
60.69
70.63
83.11
99.27
2.8%
48.26
55.26
63.69
74.05
87.06
2.3%
44.60
50.74
58.03
66.82
77.62
1.8%
41.47
46.93
53.33
60.93
70.09
1.3%
38.76
43.67
49.36
56.03
63.95
|
|
|
|
31
31
Price per share -
Brasil Telecom (R$)
Price per share -
TMAR (R$)
Price per share -
TNLP (R$)
Blended
Exchange
Ratio
TNLP
/
BRTO
3
Blended
Exchange
Ratio
TMAR
/
BRTO
3
% BRT Shareholders
% Minority Shareholders Total
% of Voting Shares TMAR Part.
Exchange Ratio: Discounted Cash Flow
Summary of the Discounted Cash Flow Valuation
24.10
96.57
46.93
2.1769
4.4794
32.66
149.01
74.05
2.4585
4.9475
Minimum
1
Maximum
2
Notes:
1
Assuming WACC of 8.2% and growth in perpetuity of 1.8%
2
Assuming WACC of 7.2% and growth in perpetuity of 2.8%
3
Considering the deduction of the Brasil Telecom bonus of R$2.54 per share
16.9%
15.3%
83.9%
83.6%
49.3%
49.7%
|
|
|
|
APPENDIX A
Information on Itaú
BBA
|
|
|
|
33
33
Itaú
BBA Qualification
Itaú
BBA presents its qualification as valuation expert through its experience in M&A
transactions
Company
Transaction
Date
Financial
advisor
of
Brasiliana
in
the
sale
of
100.0%
of
AES
Atimus
to
Tim
in
the
amount
of
US$1.0
billion
Jul/2011
Financial
advisor
to
USJ
Group
in
the
sale
of
50%
of
the
equity
in
Goiás
to
Cargill
Jun/2011
Financial
advisor
to
Tecsis
in
the
sale
of
62.5%
interest
to
BNDESPAR,
Unipar
and
Estater,
in
the
amount
of
US$175
million
May/2011
Financial
advisor
to
CPFL
Energia
in
the
acquisition
of
Jantus,
in
the
amount
of
US$964
million
Apr/2011
Financial
advisor
to
Contax
in
the
preparation
of
the
fairness
opinion
in
the
acquisition
of
Allus
Group,
in
the
amount
of
US$200
million
Apr/2011
Financial
advisor
to
Sascar
in
the
sale
of
the
control
to
GP
Investments,
in
the
amount
of
US$101
million
Mar/2011
Financial
advisor
to
Usifast
shareholders
in
the
sale
of
the
equity
interest
in
Usiminas
Mar/2011
Financial
advisor
to
Brasil
Warrants,
controlling
shareholder
of
CBMM,
in
the
sale
of
interest
of
15%
in
CBMM,
in
the
amount
of
US$1.
95
billion
Mar/2011
Financial
advisor
to
Cosan
in
the
acquisition
of
Zanin
Açúcar,
in
the
amount
of
US$200
million
Feb/2011
Financial
advisor
to
Usipar
shareholders
in
the
merger
with
Mir
Steel,
in
the
amount
of
US$200
million
Feb/2011
Financial
advisor
to
Bracor
in
the
sale
of
thirty
of
its
assets
to
Prosperitas,
in
the
amount
of
US$1.3
billion
Jan/2011
Financial
advisor
to
AEI
in
the
sale
of
its
assets,
in
the
amount
of
US$4.8
billion
Jan/2011
Financial
advisor
to
Hypermarcas
in
the
acquisition
of
100%
of
the
Mantecorp
capital,
in
the
amount
of
US$1.5
billion
Dec/2010
Financial
advisor
to
Cetip
in
the
acquisition
of
100%
of
GRV
Solutions
capital,
in
the
amount
of
US$1.2
billion
Dec/2010
Financial
advisor
to
Mahle
Metal
in
the
acquisition
of
Mahle
Participações
Nov/2010
Financial
advisor
to
Embratel
in
the
acquisition
of
the
NET
non-voting
shares
Oct/2010
Financial
advisor
to
Locaweb
in
the
sale
of
minority
interest
/
capitalization
to
Silverlake
Sep/2010
|
|
|
|
34
34
Itaú
BBA Qualification (cont’d)
|
|
|
|
APPENDIX B
Summary Description of the Transaction
|
|
|
|
37
37
Current Shareholder Structures of the Oi Companies
Current Shareholder Structure
1,2
Tele Norte Leste
Participações
Telemar Norte
Leste
Coari
BRT
Telemar
Participações
Shareholders
Tele Norte Leste
Participações
Shareholders
Telemar Norte
Leste
Shareholders
Brasil Telecom
Controlling Company
Source: Oi
Notes:
1
Excluding treasury stock
2
LF Tel S.A., La Fonte Telecom, Andrade Gutierrez, AG Telecom Part. S.A. and Portugal
Telecom hold 11.9% of the voting shares in TNL and 18% of the non-voting shares in TNL, as well as
28.9% of the non-voting shares in TMAR
ON: 79.6%
PN: 33.3%
Total: 49.3%
ON: 98.0%
PN: 48.0%
Total: 70.4%
ON: 56.4%
PN: 0.0%
Total: 22.2%
Total: 100.0%
ON: 43.6%
PN: 100.0%
Total:77.8%
ON: 20.4%
PN: 66.7%
Total: 50.7%
ON: 2.0%
PN: 52.0%
Total: 29.6%
|
|
|
|
38
38
Overview of the Transaction
Note:
1
New BRT corporate name, which will maintain TMAR as its wholly owned subsidiary
Proposed Transaction
Merger of the capital stock of Telemar Norte Leste by Coari and
mergers of Coari and Tele Norte Leste by Brasil Telecom, which will be
the only listed company, to be referred to as Oi S.A
Terms of the Transaction
The special independent committees will negotiate the terms of the
transaction and will submit their recommendations to the Board of
Directors of the Oi Companies
Material Fact Main Terms
The mergers must occur on the same date, each one of them
depending on the approval of the other
Maintenance of the equity control of Oi S.A. exclusively by Telemar
Participações
The exchange ratio mentioned by TmarPart in the announcement of
the Transaction was based on the weighted average of share prices
between
March
29
th
and
May
23
rd
,
2011,
but
the
final
ratio
must
be
negotiated between the Committees
In addition, the BRT shareholders will receive a bonus of R$1,5 billion
Exchange ratios mentioned:
TNLP3/BRTO3: 2.3794
TNLP4/BRTO4: 2.1772
TNLP4/BRTO3: 1.8420
TMAR3/BRTO3: 4.7954
TMAR5/BRTO4: 4.5044
TMAR5/BRTO3: 3.8109
Proposed Transaction
Resulting Structure
Telemar
Participações
Other
Shareholders
Oi
1
Controlling Company
Maintains the control
(Condition for approving
corporate reorganization)
|
|
|
|
APPENDIX C
Discounted Cash Flow Assumptions
|
|
|
|
40
40
195
197
198
199
201
202
204
205
206
207
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Macroeconomic Assumptions
Source: Oi
Brazilian Population (million)
GDP Growth (in real terms)
Inflation -
IPCA (%)
Average Interest Rate -
CDI (%)
PIB, IPCA and CDI projections based on the Banco Central Focus report
Population projections according to IBGE
Main Assumptions
4.50%
4.50%
4.50%
4.50%
4.50%
4.50%
4.50%
4.50%
4.50%
4.50%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
5.80%
4.80%
4.50%
4.50%
4.50%
4.50%
4.50%
4.50%
4.50%
4.50%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
11.50%
10.80%
10.00%
10.00%
10.00%
9.70%
9.40%
9.00%
9.00%
9.00%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
|
|
|
|
41
41
BRT –
Fixed Telephony and Broadband
Source: Oi
Average of Fixed Lines in Service (‘000)
ARPU of Fixed Telephony Services (R$/Month)
Broadband Subscribers Average (‘000)
Broadband ARPU (R$/Month)
The decrease in the fixed lines average is a result of the advanced maturity stage of the service and
of the migration of users to mobile telephony
The ARPU fall is a result of such migration
The
Plano
Nacional
de
Banda
Larga
(PNBL)
will
affect
negatively
the
ARPU
of
the
broadband
companies,
reducing
it
The
broadband
market
in
the
region
in
which
BRT
operates
is
more
penetrated
and
competitors
are
well
established
Main Assumptions
6.763
6.394
6.076
5.832
5.609
5.299
5.184
5.078
5.002
5.434
18,7%
18,0%
17,8%
17,6%
17,4%
17,1%
16,9%
16,7%
16,5%
16,4%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Average LES -
R2
Penetration
72.3
70.6
66.8
63.3
61.7
60.2
59.3
58.8
58.2
57.3
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2,130
2,447
2,615
2,720
2,828
3,059
3,166
3,261
3,359
2,942
31.5%
38.3%
43.0%
46.6%
50.4%
54.1%
57.7%
61.1%
64.2%
67.1%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Average Broadband
% LES
43.0
41.9
41.6
41.4
41.2
41.2
41.1
41.2
41.3
41.4
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
|
|
|
|
42
42
BRT –
Mobile Telephony
Source: Oi
BRT Penetration (%)
Average of Mobile Lines in Service (‘000)
Market Share (%)
Mobile Telephony Services ARPU (R$/Month)
115%
121%
124%
127%
129%
131%
132%
134%
135%
136%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Projections assume that BRT needs to gain market share in its region, reducing
mobile telephony ARPU in the initial projection years
Main Assumptions
8,487
9,834
10,841
11,671
12,461
13,057
13,523
13,910
14,235
14,520
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
17.4%
18.6%
19.3%
20.2%
20.9%
21.3%
21.6%
21.8%
21.8%
22.0%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
19.4
18.3
17.7
18.3
19.0
19.7
20.6
21.5
22.4
23.3
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
|
|
|
|
43
43
BRT –
Financial Projections
Source: Oi
Net Revenues (R$ million)
EBITDA (R$ million)
The
decrease
in
net
revenues
in
the
initial
years
is
due
to
the
loss
of
fixed
line
subcriptions
not
offset
by
new
mobile
subscriptions.
It
is
also
affected
by
the
need
to
reduce
prices
in
order
to
gain
market
share
in
the
mobile
telephony
market
The fall of the EBITDA margin reflects the price reduction to gain market share
-
The
margin
gain
as
of
2014
is
a
consequence
of
the
consolidation
of
the
company's
efforts
in
the
regions
where
it
operates
in
mobile
telephony
Main Assumptions
2,370
9,825
9,633
9,295
9,127
9,154
9,211
9,394
9,661
9,956
10,250
1T11
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
664
2,938
2,729
2,645
2,522
2,581
2,672
2,737
2,898
3,092
3,307
29.9%
28.3%
28.5%
27.6%
28.2%
29.0%
29.1%
30.0%
31.1%
32.3%
28.0%
1T2011
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
EBITDA
EBITDA Margin (%)
|
|
|
|
44
44
BRT –
Financial Projections
Source: Oi
CAPEX (R$ million)
Working Capital Changes (R$ million)
The effort to grow in the mobile telephony and in the broadband sectors in the
initial years of the projection in order to mitigate the fall in fixed telephony requires more capital
expenditures
The working capital needs in the initial years of the projection
is due to the ICMS credit account
Main Assumptions
231
1,352
1,610
1,588
1,540
1,552
1,467
1,433
1,395
1,390
1,426
13.8%
16.7%
17.1%
16.9%
17.0%
15.9%
15.3%
14.4%
14.0%
13.9%
9.7%
1T2011
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Capex
Capex / Net Revenues
88
(21)
99
100
36
(29)
(31)
(29)
(19)
(3)
8
1T2011
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
|
|
|
|
45
45
TMAR –
Fixed Telephony and Broadband
Source: Oi
Average of Fixed Lines in Service (‘000)
Fixed Telephony ARPU (R$/Month)
Average of Broadband Subscribers (‘000)
Broadband ARPU (R$/Month)
The
decrease
in
fixed
lines
is
due
to
the
tendency
to
migrate
to
mobile
telephony.
But
the
loss
is
smaller
due
to
the
greater
bundling
offerings
capacity
of
TMAR
The
high
growth
in
the
number
of
TMAR
broadband
subscribers
occurs
because
the
company
operates
in
a
market
marked
by
less
penetration,
where
it
is
more
likely
to
gain
customers
Main Assumptions
11,933
11,413
11,047
10,715
10,436
10,085
9,974
9,848
9,760
10,226
14.1%
14.0%
14.0%
13.9%
13.9%
13.9%
13.9%
13.8%
13.8%
13.8%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Average LES - R1
Penetration (%)
70.8
68.8
65.6
63.6
61.7
60.9
60.0
59.0
58.3
57.3
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2,633
3,162
3,731
4,251
4,612
5,255
5,623
6,016
6,437
4,911
22.1%
27.7%
33.8%
39.7%
44.2%
48.0%
52.1%
56.4%
61.1%
66.0%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Average Broadband
% LES
41.6
41.4
41.0
40.9
41.0
41.0
41.1
41.2
41.3
41.4
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
|
|
|
|
46
46
TMAR –
Mobile Telephony
Source: Oi
Penetration (%)
Average of Mobile Lines in Service (‘000)
Market Share (%)
Mobile Telephony ARPU (R$/Month)
R1
R3
Already having a solid market share in region 1, the company seeks to increase its
market share in region 3
Larger
ARPU
decrease
in
region
3
in
the
initial
projection
years
due
to
the
effort
to
increase
market
share
Main Assumptions
99%
105%
109%
114%
118%
121%
124%
126%
128%
130%
121%
128%
135%
138%
140%
142%
144%
145%
146%
147%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Penetration R1
Penetration R3
25,489
27,813
29,816
31,334
32,751
34,092
35,266
36,207
37,015
37,828
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
8,194
10,248
11,717
12,404
12,825
13,167
13,494
13,797
14,071
14,287
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
25.2%
25.7%
25.8%
25.7%
25.8%
25.9%
25.9%
25.9%
25.9%
25.9%
18.1%
20.8%
21.1%
21.3%
21.5%
21.6%
21.7%
21.8%
22.0%
22.0%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
R1
R3
18.6
18.0
17.7
18.2
18.9
19.7
20.5
21.4
22.3
23.3
26.4
24.9
24.0
25.0
26.0
27.0
28.1
29.2
30.4
31.7
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
R1
R3
|
|
|
|
47
47
TMAR –
Financial Projections
Source: Oi
Net Revenues (R$ million)
EBITDA (R$ million)
A reasonable growth in net revenues may be explained by mobile telephony increased
presence in region 3 and by the fact that region 1 is growing at a faster pace than the
national average
EBITDA
margin
expansion
due
to
the
company's
larger
market
share
in
some
regionswhere
it
operates
(i.e.
a
marked
fall
in
interconnection
expenses
due
to
the
magnitude
of
mobile
operations)
Main Assumptions
4,717
19,918
19,982
20,198
20,839
21,582
22,548
23,645
24,708
26,315
27,564
1T11
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1,331
6,420
6,770
6,984
7,345
7,604
8,037
8,396
8,844
9,334
9,756
32.2%
33.9%
34.6%
35.2%
35.2%
35.6%
35.5%
35.8%
35.5%
35.4%
28.2%
1T2011
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
EBITDA
EBITDA Margin (%)
|
|
|
|
48
48
31
(33)
255
(19)
78
(73)
(60)
(63)
(37)
(27)
(20)
1T2011
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
TMAR –
Financial Projections
Source: Oi
CAPEX (R$ million)
Working Capital Changes (R$ million)
More significant investments in the initial years due to market share pursuit in
region 3
Main Assumptions
598
3,266
3,226
3,044
3,000
2,975
2,986
3,042
3,146
3,277
3,460
16.4%
16.1%
15.1%
14.4%
13.8%
13.2%
12.9%
12.7%
12.5%
12.6%
12.7%
1T2011
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Capex
Capex / Net Revenues
|
|
|
|
49
49
Projected Tax Economies
Source: Oi
TMAR (R$ million)
BRT (R$ million)
74
89
105
90
64
49
36
27
13
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
266
216
198
179
165
149
149
149
141
141
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
TMAR tax economies as a result of negative tax base (tax loss carryforward)
BRT tax economies based on tax benefits from the goodwill generated by the
acquisition of BRT (license and network)
Main Assumptions
|
|
|
|
Tele
Norte Leste Participações S.A.
Valuation Analysis
August 1
st
, 2011
IMPORTANT DISCLAIMER: This document is a free translation only. Due to the complexities
of language translation, translations are not always precise. The original document was prepared in
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and
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for
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and
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purposes.
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Exhibit
99.4
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1
Index
SECTION 1
Executive Summary
03
SECTION 2
Information About the Evaluator
12
SECTION 3
Market and Companies' Overview
14
3.A
Market Overview
15
3.B
TNL Overview
17
3.C
TMAR Overview
23
3.D
BRT Overview
29
SECTION 4
General Assumptions of the Valuation Analysis
35
SECTION 5
TNL Valuation
37
5.A
Discounted Cash Flow
38
5.B
Book Value of Shareholders' Equity
40
5.C
Volume Weighted Average Price
42
SECTION 6
TMAR Valuation
45
6.A
Discounted Cash Flow
46
6.B
Book Value of Shareholders' Equity
53
6.C
Volume Weighted Average Price
55
SECTION 7
BRT Valuation
58
7.A
Discounted Cash Flow
59
7.B
Book Value of Shareholders' Equity
66
7.C
Volume Weighted Average Price
68
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2
Index
APPENDIX A
Condition Precedent to the Corporate Reorganization
71
APPENDIX B
Historical Stock Prices Moving Average
73
APPENDIX C
Companies' Weighted Average Cost of Capital (WACC)
76
APPENDIX D
Exchange Ratio Scenarios Comparison
78
APPENDIX E
Description of Valuation Methodologies
80
APPENDIX F
Terms and Definitions Used in this Report
84
APPENDIX G
Additional Statements and Information
86
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Executive
Summary
SECTION 1
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Executive
Summary
BTG Pactual has prepared this presentation in order to assist the
Independent Special Committee (“Comitê Especial
Independente”)
of Tele Norte Leste Participações S.A.("TNL" or the "Company") in determining the exchange ratios to be
proposed to and negotiated with the Independent Special Committee of Brasil Telecom S.A.
("BRT"), in relation to the
reorganization
of
the
Oi
Group,
as
detailed
in
the
Material
Fact
published
on
May
24 ,
2011.
For this purpose, the following methodologies were used:
1
Volume Weighted Average Historical Prices of Oi Group Shares
2
Discounted Cash Flow
3
Book Value of Shareholders' Equity
4
th
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Methodologies Used to Calculate Exchange Ratios
Exchange
ratio
based
on
book
value
of
shareholders’
equity
Calculation of the book value of shareholders’
equity of each of the companies, adjusted for minority interests, divided by
the respective number of shares
For all methodologies (except Book Value of Shareholders' Equity), BRTO4 and BRTO3
prices were adjusted for the distribution of redeemable shares, subject to
implementation
of
the
corporate
reorganization,
in
the
amount
of
R$2.5433
per
share,
according
to
the
Material
Fact
published
on
May
24 ,
2011
Exchange
ratio
based
on
the
discounted
cash
flows
of
each
of
the
companies,
considering
operational
and
financial
projections from 2011 until 2020
Sensitivity analysis to determine possible ranges of exchange ratios:
WACC:
Sensitivity analysis to variation of the WACC from 8.5% to 10.5%, in US$ and nominal
terms
Perpetuity
Growth
:
Sensitivity
analysis
to
variation
of
the
Perpetuity
Growth
(“g”)
from
1.5%
to
3.5%,
in
US$
and
nominal terms
Exchange ratio based on volume weighted average historical price
Calculation of the volume weighted average price for the periods:
Selected
Period
:
from
March
29 ,
2011
to
May
23 ,
2011
2-month
Period
:
from
March
23 ,
2011
to
May
23 ,
2011
12-month
Period
:
from
May
23 ,
2010
to
May
23 ,
2011
As additional reference, weighted averages have also been calculated for: 15-day,
30-day, 45-day, 90-day and
180-day
periods
ending
on
May
23 ,
2011
5
Exchange ratio based on the moving average of volume weighted average historical
price
Calculation considers moving volume weighted average of 3-month
period
th
rd
rd
rd
rd
rd
rd
th
Volume Weighted
Average Historical Price
Book Value of
Shareholders' Equity
Discounted Cash Flow –
“DCF”
Moving Average
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Consideration on Methodologies / Recommendations
6
Volume weighted average price
Voting
and
non-voting
shares
of
TNL
and
voting
and
non-voting
shares
of
BRT
have
adequate
liquidity
for
their
prices
to
be
considered
representative,
and,
in
addition,
TNLP3,
BRTO4
and
TNLP4
are
part
of
the
Bovespa
Index
Oi Group companies have the benefit of wide and up-to-date coverage by
research analysts of various banks and brokerages
Discounted cash flow
Reflects the intrinsic value of companies according to the set of assumptions used to
determine financial projections and discount rate
Main
disadvantage
when
compared
to
market
prices
is
that
it
does
not
differentiate
the
prices
of
common
(voting)
and
preferred
(non-voting)
shares,
something that is historically recognized by the market
Book Value of Shareholders' Equity
Methodology is based on historical cost, which usually has a large gap compared to
market value of assets
Comparable companies trading multiples
Using an average of comparable companies trading multiples to calculate the value of
the companies analyzed does not take into consideration other
relevant
characteristics that may be decisive for the value of each business (e.g., growth rates, fiscal impacts, leverage, etc.).
Precedent transaction multiples
Usually strongly influenced by factors with limited correlation to intrinsic value,
such as control premium and synergies, and which are very specific to
each
transaction
BTG Pactual believes the most appropriate valuation methodologies for
the determination of the exchange ratios are volume weighted average
price
and discounted cash flow
We
believe that the methodologies of comparable companies trading multiples, precedent transaction multiples and Book Value of Shareholders'
Equity are less suitable for the determination of exchange ratios
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1.988
1.926
1.908
1.845
1.948
1.490
1.842
2.135
2.273
2.630
1.926
1.908
2.385
2.595
1.490
2.379
2.135
2.273
2.731
1.926
1.908
2.210
2.675
2.177
2.135
2.273
1.490
Comparison Between Exchange
Ratios
7
TNLP3/BRTO3
TNLP4/BRTO4
TNLP4/BRTO3
Ratio more
favorable
to BRT
Ratio more
favorable
to TNL
Ratio more
favorable
to BRT
Ratio more
favorable
to TNL
Ratio more
favorable
to BRT
Ratio more
favorable
to TNL
1.815
2.273
2.024
2.462
Recommended Range
2.024
2.534
Selected Period
(1)
Book Value
(2)
12-month Period
(3)
2-month Period
(3)
DCF (WACC)
(4)
Moving Average
(6)
DCF
(Perpetuity
Growth)
(5)
(5) Considers Perpetuity Growth from 1.5% to 3.5%
(6)
Average
moving
averages
for
periods
of
prior
three
months
to
May
23 ,
2011,
adjusted
for
the
distribution
of
redeemable
shares
of
R
$
2.5433
per
share
issued
by
BRT
rd
Source: Economática, Facset, CVM and BTG Pactual
Notes: (1) From 03/29/2011 to 05/23/2011
(2) Considers
the
number
of
shares
on
March
31
st
,
2011
(3) Period prior to 05/23/2011
(4) Considers WACC from 8.5% to 10.5%
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Comparison Between Exchange
Ratios
8
Selected Period
(1)
15-day Period
(2)
30-day Period
(2)
45-day Period
(2)
60-day Period
(2)
90-day Period
(2)
180-day Period
(2)
360-day Period
(2)
Moving Average
(3)
TNLP3/BRTO3
TNLP4/BRTO4
TNLP4/BRTO3
Ratio more
favorable
to BRT
Ratio more
favorable
to TNL
Ratio more
favorable
to BRT
Ratio more
favorable
to TNL
Ratio more
favorable
to BRT
Ratio more
favorable
to TNL
2.731
2.675
2.462
2.284
2.210
2.150
2.143
2.097
2.177
2.630
2.595
2.534
2.394
2.385
2.349
2.312
2.211
2.379
1.988
1.948
1.919
1.846
1.845
1.844
1.858
1.815
1.842
Source: Economática, Facset, CVM and BTG Pactual
Notes: (1) From 03/29/2011 to 05/23/2011
(2) Period prior to 05/23/2011
(3) Average
moving
averages
for
three-month
period
prior
to
May
23 ,
2011,
adjusted
for
the
distribution
of
redeemable
shares
of
R
$
2.5433
per
share
issued
by
BRT
rd
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9
TNL Valuation Summary
Volume Weighted Average Price
(1,2,3)
12-month
period
prior
to
May
23 ,
2011
(inclusive)
ON:
R$
34.06
/
PN:
R$
25.57
6-month
period
prior
to
May
23 ,
2011
(inclusive)
ON:
R$
34.08
/
PN:
R$
25.81
3-month
period
prior
to
May
23 ,
2011
(inclusive)
ON:
R$
34.60
/
PN:
$
26.69
(R$ Million, except price per share)
As
of
March
31 ,
2011
(R$ million, except otherwise indicated)
TMAR Equity Value - Proportional
18,664
(-) NPV of holding expenses
(107)
(-) Net Debt - Mar/2011
(1,238)
Proprietary Equity Value (R$ mm)
17,319.6
# of shares
467
Value per share (R$)
37.0
79,384
53,871
12,017
13,496
467
R$/share
28.87
Total Assets
(-) Total liabilities
(-) Minority interest
= Shareholders' Equity
Number of shares (million)
Source: Companhia, CVM, Economática and BTG Pactual.
Notes:
1.
Base
date:
December
31 ,
2010.
2.
Price per share for the Valuation does not allocate premium or discount for any of the
classes of shares.
3.
Number
of
shares
on
March
31 ,
2011,
excluding
treasury
shares.
st
st
rd
rd
rd
st
Economic
Value
(Discounted
Cash
Flow)
Section
5.A
–
Discounted
Cash
Flow
–
Page
38
Section
5.B
–
Book
Value
of
Shareholders'
Equity
–
Page
40
Section
5.C
–
Volume
Weighted
Average
Price
–
Page
42
Book
Value
of
Shareholders'
Equity
-
TNL
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10
TMAR Valuation Summary
Volume Weighted Average Price
12-month
period
prior
to
May
23
,
2011
(inclusive)
ON:
R$
58.64
/
PN:
R$
48.86
6-month
period
prior
to
May
23
,
2011
(inclusive)
ON:
R$
58.20
/
PN:
R$
50.75
3-month
period
prior
to
May
23
,
2011
(inclusive)
ON:
R$
70.35
/
PN:
R$
53.74
Economic
Value
(Discounted
Cash
Flow)
(1,2,3)
(R$ Million, except price per share)
Book
Value
of
Shareholders'
Equity
-
TMAR
As of March 31 , 2011
(R$ million, except otherwise indicated)
Section
6.A
–
Discounted
Cash
Flow
–
Page
46
Section
6.B
–
Book
Value
of
Shareholders’
Equity
–
Page
53
Section
6.C
–
Volume
Weighted
Average
Price
–
Page
55
78,361
51,966
5,976
20,419
344
R$/share
59.35
Total Assets
(-) Total liabilities
(-) Minority interest
= Shareholders' Equity
Number of shares (million)
NPV of Free Cash Flow to Firm (US$mm)
27,359
NPV of Free Cash Flow to Firm (R$mm)
43,774
BRT Enterprise Value
9,757
(-) BRT Minorities
(4,949)
TMAR Enterprise Value ex-BRT minorities
38,826
(-) Net Debt - Mar/2011
(13,958)
(+) BRT minorities Net Cash - Mar/2011
659
(+) NPV of Accumulated Losses
374
(+) NPV of Fiscal benefit from BRT acquisition goodwill
611
Equity Value (R$ mm)
26,511.9
# of shares
344
Value per share (R$)
77.06
Source: Companhia, CVM, Economática and BTG Pactual.
Notes:
1.
Base
date:
December
31
,
2010.
2.
Price
per
share
for
the
Valuation
does
not
allocate
premium
or
discount
for
any
of
the
classes
of
shares.
3.
Number
of
shares
on
March
31 ,
2011,
excluding
treasury
shares.
rd
rd
rd
st
st
st
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11
BRT Valuation Summary
Economic
Value
(Discounted
Cash
Flow)
(1,2,3)
(R$ Million, except share price)
Volume Weighted Average Price
12-month
period
prior
to
May
23
,
2011
(inclusive)
ON:
R$
15.67
/
PN:
R$
12.10
6-month
period
prior
to
May
23
,
2011
(inclusive)
ON:
R$
15.99
/
PN:
R$
13.03
3-month
period
prior
to
May
23
,
2011
(inclusive)
ON:
R$
17.00
/
PN:
R$
14.23
Section
7.A
–
Discounted
Cash
Flow
–
Page
59
Section
7.B
–
Book
Value
of
Shareholders'
Equity
–
Page
66
Section
7.C
–
Volume
Weighted
Average
Price
–
Page
68
(Not
adjusted
for
proposed
distribution
of
redeemable
shares)
26,811
15,381
0
11,430
590
R$/share
19.38
Total Assets
(-) Total liabilities
(-) Minority interest
= Shareholders' Equity
Number of shares (million)
NPV of FCFF - projected period (US$ mm)
2,591
NPV of FCFF - perpetuity (US$ mm)
3,507
NPV of Free Cash Flow to Firm (US$mm)
6,098
NPV of Free Cash Flow to Firm (R$mm)
9,757
(+) Net Cash - Mar/2011
1,299
(+) NPV of Fiscal benefit from BRT acquisition goodwill
1,239
Equity Value (R$ mm)
12,295.2
# of shares
590
Value per share (R$)
20.85
Value per share after redeemable shares (R$)
18.30
Source: Companhia, CVM, Economática and BTG Pactual.
Notes:
1.
Base
date:
December
31
,
2010.
2.
Price
per
share
for
the
Valuation
does
not
allocate
premium
or
discount
for
any
of
the
classes
of
shares.
3.
Number
of
shares
on
March
31
,
2011,
excluding
treasury
shares.
st
st
rd
rd
rd
Book
Value
of
Shareholders'
Equity
-
BRT
As
of
March
31
st
,
2011
(R$ million, except otherwise indicated)
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Information About the Evaluator
SECTION 2
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Information About the Evaluator
As established in CVM Instruction No. 319, Banco BTG Pactual S.A. (“BTG
Pactual”) represents that:
13
1. BTG Pactual holds no securities issued by Tele Norte Leste Participações
S.A. (TNLP4, TNLP3 and TNE US), Telemar Norte Leste S.A. (TMAR5, TMAR3,
TMAR6)
or Brasil Telecom S.A. (BRTO4, BRTO3 and BTM US) based on data as of July 21 2011.
2. It has no direct or indirect interest in TNL or in the Transaction, and there is no
other relevant circumstance that may be considered a conflict
of interest;
3. The controlling shareholder or managers of the Companies have not
directed, limited, hindered or performed any act that adversely affected or may
have adversely affected the access to, use or knowledge of information, assets,
documents or work methodologies relevant for the quality of the respective
conclusions;
4. It has no conflict of interest that may in any way restrict its
capacity to independently arrive at the conclusions presented in this Report;
st
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Market
and Companies' Overview
SECTION 3
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SECTION 3.A
Market and Companies' Overview
Market Overview
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Brazilian Telecommunications Market
Snapshot
•
Fixed Broadband penetration: 23% of households;
•
Mobile penetration rate reached 105% of the population in Dec/10;
•
Broadband presenting strong growth;
•
Multiple chip is a market trend (on-net calls)
•
As of Dec/10, there were over 4.3 million 3G accesses (only 2.1%
of the mobile users)
•
Brazilian mobile ARPU (average revenue per user) is only
US$13.59, with great growth potential when compared to other
countries such as Chile US$ 15.41, Italy US$ 24.45, Israel US$
38.23
•
Pre-Paid mobile users represents 82% of the total access
Brazilian
Market
(Dec/10)
–
Accesses
(million)
Total Accesses: 268
Mobile
Market
–
Includes
3G
(million
accesses)
121.0
150.6
174.0
202.9
217.3
2007
2008
2009
2010
Jun-11
Notes:
1) December 2010 data
Source: Anatel, Teleco and BTG Pactual
Overview
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SECTION 3.B
Market and Companies' Overview
TNL Overview
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TNL
Overview
Company Overview
18
Sources: Company’s Website and Reports
Brief Overview
Recent Events
Tele Norte Leste Participações was created on May 22
, 1998, during the privatization process of Sistema Telebrás.
Tele Norte Leste Participações has common shares and preferred shares traded
on the BM&FBovespa.
TNL’s
primary
purpose
is
to
hold
shares
in
and
manage
its
direct
and
indirect
subsidiaries.
TNL is a holding company controled by Telemar Participações S.A.
(“TmarPart”), which held 17.3% of its total capital and 46.82% of its voting capital
as
of
March
31 ,
2011.
TNL
has
the
following
subsidiaries:
Telemar
Norte
Leste
S.A,
TNL
PCS
S.A.,
14
Brasil
Telecom
S.A.,
and
Brasil
Telecom
Celular
S.A.
March 28
, 2011: TNL approved a partial increase in its capital with the issuance of 56,417,086
new common shares and 28,409,175 preferred
shares, totaling R$
2,978,006,042.55.
June 3
, 2011:
TNL disclosed to the market the name of the new CEO of TNL and related companies,
after having previously reported the fact that the
former CEO was going to leave
the company.
nd
th
rd
st
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Executive Officer
Position
José Mauro Mettrau Carneiro da Cunha
(1)
CEO
Fabiano Castello
Internal Audit
João de Deus
Executive Planning
George Moraes
Corporate Communication
Jorge Jardim
Institutional Relations
Carlos Cidade
Regulatory Policy
Eurico Teles
Legal
Paulo Mattos
Regulatory
Julio Fonseca
Human Resources
Alex Zornig
Administrative and Financial
Luiz Perrone
International Affairs
James Meaney
COO
TNL Overview
Company Overview
19
Board of Directors and Executive Officers
Shareholder Structure
Source: Company.
Notes:
Board of Directors (mandated until 2013)
José
Mauro Mettrau Carneiro da Cunha ,
Member
Shakhaf Wine,
Member
Alexandre Jereissati Legey,
Member
Carlos Fernando Costa,
Member
Pedro Jereissati,
Member
Sérgio Franklin Quintella,
Member
Otávio Marques de Azevedo,
Member
Renato Torres de Faria,
Member
Fernando Magalhães Portella,
Member
Cláudio Figueiredo Coelho Leal,
Member
Zeinal Abedin Mahomed Bava,
Member
Demósthenes Marques,
Member
Fábio de Oliveira Moser,
Member
Shareholder
ON Shares
% ON
PN Shares
% PN
Total
% Total
Telemar Participações
103,813,689
55.51%
--
--
103,813,689
21.78%
PREVI
6,857,087
3.67%
11,730,869
4.05%
18,587,956
3.90%
Luxemburgo Participações
--
--
11,412,900
3.94%
11,412,900
2.39%
LF Tel S.A.
--
--
11,412,700
3.94%
11,412,700
2.39%
Bratel Brasil
20,752,270
11.10%
28,298,549
9.77%
49,050,819
10.29%
Others
52,584,892
28.12%
220,611,054
76.17%
273,195,946
57.31%
Treasury Shares
3,020,880
1.62%
6,166,566
2.13%
9,187,446
1.93%
TOTAL
187,028,818
100.00%
289,632,638
100.00%
476,661,456
100.00%
th
1)
Mr.
Jose
Mauro
Mettrau
Carneiro
da
Cunha
was
elected
as
interim
CEO
at
the
Special
Meeting
of
the
Board
of
Directors
of
TNL
held
on
June
30 ,
2011
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20
Source: Company and CVM
TNL Overview
Financial Statements: Income Statement
Twelve months ended:
3 months ended
Income Statement
12/31/2009
12/31/2010
03/31/2010
03/31/2011
(Values in R$ '000)
Net Operating Revenues
29,996,832
29,479,382
7,463,051
6,933,077
Cost of services rendered
(18,457,853)
(16,638,670)
(4,145,832)
(4,009,722)
Gross profit
11,538,979
12,840,712
3,317,219
2,923,355
Operating income (expenses)
(3,731,159)
(8,743,389)
(2,302,608)
(2,394,607)
Selling
(5,301,979)
(4,886,331)
(1,211,925)
(1,257,410)
General and administrative
(3,067,350)
(2,789,784)
(781,548)
(703,030)
Other operating revenues
8,102,949
1,331,997
235,516
224,197
Other operating expenses
(3,464,779)
(2,399,271)
(544,651)
(658,364)
Operating profit before financial interest
7,807,820
4,097,323
1,014,611
528,748
Financial revenues
1,601,025
1,929,470
383,166
343,706
Financial expenses
(3,988,338)
(4,361,106)
(956,811)
(1,572,107)
Earnings before income taxes and social contribution
5,420,507
1,665,687
440,966
(699,653)
Income tax and social contribution
(328,093)
83,809
76,525
304,324
Current taxes
(874,917)
(688,485)
(144,448)
(185,481)
Deferred taxes
546,824
772,294
220,973
489,805
Net profit (losses)
5,092,414
1,749,496
517,491
(395,329)
|
|
|
|
21
TNL Overview
Financial Statements: Consolidated Balance Sheet
Source: Company and CVM
Period ended:
ASSETS
12/31/2008
12/31/2009
12/31/2010
03/31/2011
(Values in R$ '000)
Current Assets
17,052,579
18,318,476
22,172,485
25,777,897
Cash & Cash Equivalents
10,737,949
8,024,369
11,199,806
13,979,588
Credits (clients)
3,896,332
5,941,987
5,893,845
5,878,953
Inventories
153,368
162,774
98,212
116,314
Recoverable Securities
791,856
507,831
1,103,642
1,316,374
Others Current Assets
1,473,074
3,681,515
3,876,980
4,486,668
Non-current assets
23,492,166
55,683,786
52,964,898
53,605,674
Short-term investments measured at fair value
1,519
4,991
9,092
34,087
Deferred
taxes
3,276,242
5,727,450
5,623,381
5,975,087
Others Non-current Assets
4,691,336
6,815,347
7,328,653
8,290,397
Investments
49,320
54,695
54,692
54,692
Plant,
properties and equipment
12,718,509
25,296,273
23,349,065
23,032,971
Intangible assets
2,755,240
17,785,030
16,600,015
16,218,440
Total Assets
40,544,745
74,002,262
75,137,383
79,383,571
|
|
|
|
22
TNL Overview
Financial Statements: Consolidated Balance Sheet
Source: Company and CVM
Period ended:
LIABILITIES AND SHAREHOLDERS’ EQUITY
12/31/2008
12/31/2009
12/31/2010
03/31/2011
(Values in R$ '000)
Current liabilities
9,149,421
18,272,538
19,315,668
17,231,903
Wages and social contributions
273,541
362,385
567,556
505,288
Suppliers
1,902,629
4,054,785
4,038,747
3,751,229
Taxes
437,052
187,457
732,505
914,178
Short-term loans and
financing
3,545,906
7,964,360
7,144,441
5,354,409
Other liabilities
2,650,439
4,083,055
5,061,855
4,757,213
Provisions
339,854
1,620,496
1,770,564
1,949,586
Long-term liabilities
20,432,403
35,619,206
35,848,158
36,639,041
Long-term loans and financing
16,189,694
20,861,606
21,991,458
22,193,110
Other liabilities
1,960,798
4,753,905
4,849,422
5,537,959
Deferred securities
26,041
4,005,836
3,331,162
3,186,614
Provisions
2,255,870
5,997,859
5,676,116
5,721,358
Shareholders’ Equity
10,962,921
20,110,518
19,973,557
25,512,627
Capital Stock
5,448,731
5,448,731
5,448,731
7,254,682
Capital Reserves
105,657
130,722
142,840
1,316,581
Profit Reserves
5,116,033
6,565,155
6,456,432
6,456,432
Accumulated profit / losses
(825,004)
-
-
(169,795)
Valuation adjustments to
equity
-
(861,417)
(868,867)
(1,361,947)
Others Results
(612,787)
-
-
-
Minorities Interest
1,730,291
8,827,327
8,794,421
12,016,674
Total Liabilities and Shareholders’ Equity
40,544,745
74,002,262
75,137,383
79,383,571
|
|
|
|
SECTION 3.C
Market and Companies' Overview
TMAR Overview
|
|
|
|
24
TMAR Overview
Company Overview
Source: Company’s Website and Reports
Brief Description
Recent Events
In 2001, TNL integrated fixed-line operators in 16 states in the North, Northeast
and Southeast of Brazil, forming a single company, Telemar Norte
Leste SA
("Telemar“
or “TMAR”).
TMAR provides fixed telecommunications services in Region I, consisting of 16 states in
the northeast and southeast of Brazil and international
long
distance
service
-
LDI
throughout
the
Brazilian
territory.
The
company
is
controlled
by
TNL,
which
as
of
March
31 ,
2011
held
70.39%
of
its
total
capital
and
98.01%
of
the
voting
shares.
TMAR also owns the subsidiaries BRT, 14 Brasil Telecom Celular S.A . and TNL PCS
S.A.
March
28 ,
2011:
TMAR
approved
a
partial
increase
in
its
capital
with
the
issuance
of
46,969,121
new
common
shares
and
58,696,856
preferred
shares, totaling R$ 5,968,920,266.67.
th
st
|
|
|
|
Shareholder
ON Shares
% ON
PN Shares
% PN
Total
% Total
Tele Norte Leste Participações
150,971,022
98.01%
91,250,247
0.4791
242,221,269
70.31%
Telemar Participações
--
--
13,079,176
6.87%
13,079,176
3.80%
Bratel Brasil
--
--
32,475,534
0.1705
32,475,534
9.43%
Luxemburgo Participações
--
--
11,240,386
5.90%
11,240,386
3.26%
LF Tel S.A.
--
--
11,240,386
0.059
11,240,386
3.26%
Others
3,061,191
1.99%
30,738,889
16.14%
33,800,080
9.81%
Treasury Shares
1
0.00%
440,132
0.0023
440,133
0.13%
TOTAL
154,032,214
100.00%
190,464,750
100.00%
344,496,964
100.00%
25
TMAR Overview
Company Overview
Board of Directors and Executive Officers
Shareholder Structure
Source: Company.
Notes:
1)
Mr.
Jose
Mauro
Mettrau
Carneiro
da
Cunha
was
elected
as
interim
CEO
at
the
Special
Meeting
of
Board
of
Directors
of
TNL
held
on
June
30
,
2011
Board of Directors (mandated until 2014)
José Mauro Mettrau Carneiro da Cunha ,
Member
João de Deus Pinheiro de Macêdo,
Member
Eurico de Jesus Teles Neto,
Member
Luiz Eduardo Falco Pires Corrêa,
Member
Marcos Duarte Santos,
Member
Executive Officer
Position
José Mauro Mettrau Carneiro da Cunha
(1)
CEO
Fabiano Castello
Internal Audit
João de Deus
Executive Planning
George Moraes
Corporate Communication
Jorge Jardim
Institutional Relations
Carlos Cidade
Regulatory Policy
Eurico Teles
Legal
Paulo Mattos
Regulatory
Julio Fonseca
Human Resources
Alex Zornig
Administrative and Financial
Luiz Perrone
International Affairs
James Meaney
COO
th
|
|
|
|
26
TMAR Overview
Financial Statements: Income Statement
Source: Company and CVM
Twelve months ended:
3 months ended
Income Statement
12/31/2009
12/31/2010
03/31/2010
03/31/2011
(Values in R$ '000)
Net Operating Revenues
29,927,182
29,431,553
7,446,663
6,933,078
Cost of services rendered
(18,386,335)
(16,597,686)
(4,129,348)
(4,009,740)
Gross profit
11,540,847
12,833,867
3,317,315
2,923,338
Operating income (expenses)
(3,687,894)
(8,708,558)
(2,288,258)
(2,384,275)
Selling
(5,287,206)
(4,867,768)
(1,206,776)
(1,257,075)
General and administrative
(3,027,938)
(2,755,048)
(773,358)
(694,368)
Other operating revenues
8,065,238
1,301,504
234,925
225,042
Other operating expenses
(3,437,988)
(2,387,246)
(543,049)
(657,874)
Operating profit before financial interest
7,852,953
4,125,309
1,029,057
539,063
Financial revenues
1,607,518
1,888,659
408,918
335,352
Financial expenses
(4,052,097)
(4,248,331)
(999,517)
(1,535,088)
Earnings before income taxes and social contribution
5,408,374
1,765,637
438,458
(660,673)
Income tax and social contribution
(315,636)
112,773
80,879
291,660
Current taxes
(870,583)
(688,481)
(144,435)
(185,470)
Deferred taxes
554,947
801,254
225,314
477,130
Net profit (losses)
5,092,738
1,878,410
519,337
(369,013)
|
|
|
|
27
TMAR Overview
Financial Statements: Consolidated Balance Sheet
Source: Company and CVM
Period ended:
ASSETS
12/31/2008
12/31/2009
12/31/2010
03/31/2011
(Values in R$ '000)
Current Assets
16,042,542
17,883,270
21,495,565
25,269,441
Cash & Cash Equivalents
9,843,950
7,621,524
10,564,637
13,489,271
Credits (clients)
3,897,171
5,958,504
5,896,592
5,880,865
Inventories
153,368
162,448
98,212
116,314
Recoverable taxes
708,359
494,334
1,089,823
1,311,704
Others Current Assets
1,439,694
3,646,460
3,846,301
4,471,287
Non-current Assets
23,362,403
55,493,656
52,480,821
53,091,242
Short-term investments measured at fair value
1,519
4,991
9,092
34,087
Recoverable
Securities
2,862,399
5,249,093
5,186,261
5,525,123
Receivables
450,175
468,756
-
-
Other assets
4,651,147
6,779,742
7,299,201
8,243,045
Investments
41,691
47,064
47,061
47,061
Plant,
properties and equipment
12,675,924
25,236,642
23,340,448
23,024,652
Intangible assets
2,679,548
17,707,368
16,598,758
16,217,274
Total Assets
39,404,945
73,376,926
73,976,386
78,360,683
|
|
|
|
28
TMAR Overview
Financial Statements: Consolidated Balance Sheet
Source: Company and CVM
Period ended:
LIABILITIES AND SHAREHOLDERS’ EQUITY
12/31/2008
12/31/2009
12/31/2010
03/31/2011
Current liabilities
8,695,587
17,909,751
17,608,807
15,624,929
Wages and social contributions
270,795
359,665
567,147
504,878
Suppliers
1,898,626
4,045,798
4,039,775
3,751,412
Taxes
436,976
187,377
732,415
914,077
Short-term loans and
financing
3,340,557
7,857,669
5,551,989
3,829,027
Other liabilities
2,427,858
3,839,311
4,946,917
4,675,949
Provisions
320,775
1,619,931
1,770,564
1,949,586
Long-term liabilities
21,270,744
35,772,516
35,535,962
36,341,438
Long-term loans and financing
17,268,949
21,240,147
21,874,045
22,090,910
Other liabilities
1,703,718
4,530,115
4,655,098
5,343,304
Deferred securities
26,041
4,005,838
3,331,161
3,186,614
Provisions
2,272,036
5,996,416
5,675,658
5,720,610
Shareholders’ Equity
9,438,614
19,694,659
20,831,617
26,394,316
Capital Stock
7,418,989
7,434,429
7,445,720
11,614,365
Capital Reserves
2,220,406
2,039,144
2,051,161
3,807,926
Profit Reserves
1,460,904
4,832,786
6,243,830
6,272,487
Accumulated profit / losses
(941,572)
-
-
(203,703)
Valuation adjustments to
equity
-
(1,050,522)
(1,050,522)
(1,072,973)
Others Results
(747,310)
-
-
-
Minorities Interest
27,197
6,438,822
6,141,428
5,976,214
Total Liabilities and Shareholders’
Equity
39,404,945
73,376,926
73,976,386
78,360,683
|
|
|
|
SECTION 3.D
Market and Companies' Overview
BRT Overview
|
|
|
|
30
BRT Overview
Company Overview
Source: Company’s website and reports
Brief Description
Recent Events
October 20
, 2010: CADE approved, without structural restrictions, the acquisition of BRT by Oi,
subject to the signature of a “Letter of
Commitment of
Performance”
(TCD –
Termo de Compromisso de Desempenho).
June 16
, 2010:
After an extraordinary shareholders meeting, the minority holders of common and
preferred shares of BRT did not accept the
proposed exchange ratio between
shares of BRT and TMAR
January 14
, 2010:
Disclosure of an increase of R$1,290 million to the provision for legal contingencies
in connection with civil legal claims with
respect
to
the
rights
of
holders
of
expansion
plans,
implying
an
adjusted
gross
total
of
R$2,535
million.
th
th
th
TMAR acquired BRT in 2009, starting to operate throughout the national territory.
BRT is a concessionaire of the STFC – Serviço Telefônico Fixo
Comutado (“Fixed Switched Telephone Service”) and has been operating since
July 1998 in Region II of the PGO – Plano Geral de Outorgas (“General
Concession Plan”), covering the Brazilian states of Acre, Rondonia, Mato
Grosso, Mato Grosso do Sul, Tocantins, Goiás, Paraná, Santa Catarina, Rio de
Janeiro, and Distrito Federal
In January 2004, the company also began to offer domestic long distance and
international long distance services in all regions. The local service
outside
the Region II started to be offered in January 2005.
BRT also owns authorization to provide mobile services in Region II through14 Brasil
Telecom Celular S.A.
|
|
|
|
Shareholder
ON Shares
% ON
PN Shares
% PN
Total
% Total
Coari
161,990,001
79.63%
128,675,049
32.20%
290,665,050
48.20%
Minority
41,433,175
20.37%
257,690,765
64.49%
299,123,940
49.60%
Treasury Shares
--
--
13,231,556
3.31%
13,231,556
2.19%
TOTAL
203,423,176
100.00%
399,597,370
100.00%
603,020,546
100.00%
Board of Directors (mandated until 2014)
José Mauro Mettrau Carneiro da Cunha ,
Member
João de Deus Pinheiro de Macêdo,
Member
Francisco Aurélio Sampaio Santiago,
Member
Francis James Leahy Meaney,
Member
João Carlos de Almeida Gaspar,
Member
31
BRT Overview
Company Overview
Board of Directors and Executive Officers
Shareholder Structure
Source: Company
1)
Mr. Jose
Mauro
Mettrau
Carneiro
da
Cunha
was
elected
as
interim
CEO
at
the
Special
Meeting
of
Board
of
Directors
of
TNL
held
on
June
30 ,
2011
Notes:
th
Executive Officer
Position
José
Mauro Mettrau Carneiro da Cunha
(1)
CEO
Fabiano Castello
Internal Audit
João de Deus
Executive Planning
George Moraes
Corporate Communication
Jorge Jardim
Institutional Relations
Carlos Cidade
Regulatory Policy
Eurico Teles
Legal
Paulo Mattos
Regulatory
Julio Fonseca
Human Resources
Alex Zornig
Administrative and Financial
Luiz Perrone
International Affairs
James Meaney
COO
|
|
|
|
32
Source: Company and CVM
BRT
Overview
Financial Statements: Income Statement
Twelve months ended:
3 months ended
Income Statement
12/31/2009
12/31/2010
03/31/2010
03/31/2011
(Values in R$ '000)
Net Operating Revenues
10,919,890
10,263,292
2,620,563
2,369,848
Cost of services rendered
(5,764,221)
(4,732,081)
(1,247,267)
(1,136,924)
Gross profit
5,155,669
5,531,211
1,373,296
1,232,924
Operating income (expenses)
(6,232,318)
(3,071,681)
(793,238)
(828,331)
Selling
(1,417,845)
(1,025,010)
(280,296)
(290,045)
General and administrative
(1,434,808)
(1,538,941)
(315,742)
(350,033)
Other operating revenues
659,940
523,962
117,933
90,929
Other operating expenses
(4,039,605)
(1,031,692)
(315,133)
(279,182)
Operating profit before financial interest
(1,076,649)
2,459,530
580,058
404,593
Financial revenues
630,247
979,455
195,502
245,164
Financial expenses
(911,596)
(1,059,710)
(254,910)
(525,712)
Earnings before income taxes and social
contribution
(1,357,998)
2,379,275
520,650
124,045
Income tax and social contribution
338,687
(408,415)
(139,005)
(30,673)
Current taxes
(449,903)
(149,117)
(40,412)
(57,946)
Deferred taxes
788,590
(259,298)
(98,593)
27,273
Net profit (losses)
(1,019,311)
1,970,860
381,645
93,372
|
|
|
|
33
Source: Company and CVM
BRT
Overview
Financial Statements: Consolidated Balance Sheet
Period ended:
ASSETS
12/31/2008
12/31/2009
12/31/2010
03/31/2011
(Values in R$ '000)
Current Assets
5,960,538
6,127,062
8,486,797
8,245,326
Cash & Cash Equivalents
2,040,425
2,099,392
4,049,014
3,560,813
Credits (clients)
2,210,090
1,992,141
2,069,908
2,046,614
Inventories
54,048
42,063
14,323
14,303
Recoverable taxes
18,919
122,852
334,954
400,356
Others Current Assets
1,637,056
1,870,614
2,018,598
2,223,240
Non-current Assets
12,372,501
18,436,858
18,399,317
18,565,529
Short-term investments measured at fair value
-
-
-
12,425
Recoverable Securities
1,714,512
5,680,495
5,276,443
5,298,455
Receivables
-
1,674,750
1,911,134
1,980,630
Other Non-current assets
3,110,443
4,237,194
4,571,138
4,678,240
Investments
3,744
5,374
5,370
5,370
Plant, properties and equipment
5,911,584
5,266,641
5,316,799
5,339,241
Intangible assets
1,632,218
1,572,404
1,318,433
1,251,168
Total Assets
18,333,039
24,563,920
26,886,114
26,810,855
|
|
|
|
34
Source: Company and CVM
BRT Overview
Financial Statements: Consolidated Balance Sheet
Period ended:
LIABILITIES AND SHAREHOLDERS’ EQUITY
12/31/2008
12/31/2009
12/31/2010
03/31/2011
(Values in R$ '000)
Current liabilities
5,061,778
5,423,672
6,690,689
6,302,152
Wages and social contributions
193,394
120,082
171,782
157,397
Suppliers
1,889,543
1,554,278
1,636,598
1,542,001
Taxes
809,070
831,921
1,053,134
255,196
Short-term loans and
financing
670,707
869,963
1,044,226
1,038,113
Other liabilities
909,800
748,179
1,470,037
1,953,207
Provisions
589,264
1,299,249
1,314,912
1,356,238
Long-term liabilities
6,995,504
9,234,611
8,858,586
9,078,492
Long-term loans and financing
3,993,198
3,572,606
3,320,860
3,192,912
Other liabilities
1,377,469
1,839,173
1,891,249
2,110,725
Deferred securities
9,346
8,885
11,216
11,144
Provisions
1,615,491
3,813,947
3,635,261
3,763,711
Shareholders’ Equity
6,275,757
9,905,637
11,336,839
11,430,211
Capital Stock
3,470,758
3,731,059
3,731,059
3,731,059
Capital Reserves
1,490,375
5,869,560
5,869,560
5,869,560
Profit Reserves
1,359,538
304,504
1,735,869
1,735,869
Accumulated profit / losses
(39,258)
-
-
93,389
Minorities
Interest
(5,656)
514
351
334
Total Liabilities and Shareholders’ Equity
18,333,039
24,563,920
26,886,114
26,810,855
|
|
|
|
General
Assumptions of the Valuation Analysis
SECTION 4
|
|
|
|
(1)
General Assumptions of the Valuation Analysis
Macroeconomic Assumptions
36
The
macroeconomic
assumptions
below
are
estimates
from
Banco
Central’s
Focus
report
dated
July
16 ,
2011,
unless
otherwise indicated
Given
that
the
Focus
Reports
only
provides
estimates
for
2011-2015,
from
2016
onwards
estimates
were
kept
constant,
except
for
the
exchange
rate
which
has
been adjusted to reflect the maintenance of purchasing power parity between U.S. and
Brazil currencies
Note:
(1) Company’s projections
th
Macroeconomic Assumptions
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
Source: Banco Central’s Focus report dated July 16th, 2011
GDP Growth rate (real terms)
3.96%
4.16%
4.50%
4.52%
4.44%
4.44%
4.44%
4.44%
4.44%
4.44%
IPCA
6.30%
5.17%
4.68%
4.63%
4.61%
4.61%
4.61%
4.61%
4.61%
4.61%
IGPM
5.95%
5.10%
4.69%
4.64%
4.58%
4.58%
4.58%
4.58%
4.58%
4.58%
FX rate R$/US$ -
average
1.60
1.66
1.73
1.79
1.82
1.85
1.89
1.93
1.97
2.01
FX rate R$/US$ -
end of period
1.60
1.68
1.75
1.80
1.83
1.87
1.91
1.95
1.99
2.03
Average Selic rate
12.2%
12.6%
11.3%
10.6%
10.2%
10.2%
10.2%
10.2%
10.2%
10.2%
Source: Economist Intelligence Unit dated July 16th, 2011
US CPI
2.70%
2.10%
2.30%
2.50%
2.50%
2.50%
2.50%
2.50%
2.50%
2.50%
Population
(million inhabitants)
195
197
198
199
201
202
204
205
206
207
R1
107
108
109
109
110
111
112
112
113
114
R2
46
46
47
47
47
48
48
48
49
49
R3
42
42
43
43
43
44
44
44
44
45
|
|
|
|
SECTION 5.A
TNL Valuation
Discounted Cash Flow
|
|
|
|
Valuation
Discounted Cash Flow
Economic Value (Discounted Cash Flow)
(R$ millions, except price per share)
Holding Company Expenses (calculation details)
Valuation Parameters
(R$ millions, except price per share)
TNL has no operations and relies on cash flows from TMAR. As a result the valuation of TNL
is based on TNL’s proportional
ownership
of
TMAR’s
discounted
cash
flows
(see
page
52-
TMAR
Valuation)
and
discounting
TNL’s
general
and
administrative expenses
39
TMAR Equity Value - Proportional
18,664
(-) NPV of holding expenses
(107)
(-) Net Debt - Mar/2011
(1,238)
Proprietary Equity Value (R$ mm)
17,319.6
# of shares
467
Value per share (R$)
37.0
WACC
9.9%
Perpetuity Growth
2.5%
NPV of holding expenses
(107)
TNL stake in TMAR
70.4%
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
Holding Expenses (R$ mm)
(30.7)
(32.3)
(33.8)
(35.4)
(37.0)
(38.7)
(40.5)
(42.3)
(44.3)
(44.6)
(+) Tax shield from holding expenses (R$mm)
10.4
11.0
11.5
12.0
12.6
13.2
13.8
14.4
15.1
15.2
FX rate
1.6
1.7
1.7
1.8
1.8
1.8
1.9
1.9
2.0
2.0
(=) Holding Expenses after-tax (US$ mm)
(12.7)
(12.8)
(12.9)
(13.0)
(13.4)
(13.8)
(14.2)
(14.5)
(14.9)
(14.7)
Discount Factor
1.0
0.9
0.8
0.7
0.7
0.6
0.5
0.5
0.4
0.4
Discounted Cash Flow in US$ mm
(12.1)
(11.2)
(10.2)
(9.4)
(8.8)
(8.2)
(7.7)
(7.2)
(6.7)
(6.0)
|
|
|
|
SECTION 5.B
TNL Valuation
Book Value of Shareholders' Equity
|
|
|
|
Book
Value of Shareholders' Equity
41
TNL price per share is R$28.87, based on the Book Value of Shareholders' Equity, excluding
minority interests
Book
Value
of
Shareholders'
Equity
-
TNL
As
of
March
31
st
,
2011
(R$ million, except otherwise indicated)
Source: CVM and Company.
Note:
1
Excludes treasury shares
79,384
53,871
12,017
13,496
467
R$/share
28.87
Total Assets
(-) Total liabilities
(-) Minority interest
= Shareholders' Equity
Number of shares (million)
|
|
|
|
SECTION 5.C
TNL Valuation
Volume Weighted Average Price
|
|
|
|
Volume
Weighted Average Price
Price evolution of TNL shares traded on the BOVESPA
VWAP
(period before 05
-
23
-
2011)
:
12-month:
R$34.06
6-month:
R$34.08
3-month:
R$34.60
2-month:
R$35.08
1-month:
R$32.91
ON Shares (TNLP3)
PN Shares (TNLP4)
VWAP
(period before 05
-
23
-
2011)
:
12-month:
R$25.57
6-month:
R$25.81
3-month:
R$26.69
2-month:
R$27.14
1-month:
R$26.45
43
(Price in R$ per share and volume in R$ million)
Source:
CVM and Economática, as of July 7th, 2011.
Note: number of shares excludes treasury shares.
th
th
0
20
40
60
80
100
120
0
5
10
15
20
25
30
35
40
45
05/01/2009
05/10/2009
05/07/2010
05/04/2011
Volume (R$ million)
VWAP: R$34.86
(Since
January
5
,
2009)
0
50
100
150
200
250
300
350
400
0
5
10
15
20
25
30
35
40
05/01/2009
05/10/2009
05/07/2010
05/04/2011
Volume (R$ million)
Price (R$ / share)
VWAP: R$27.80
(Since
January
5
,
2009)
Price (R$ / share)
|
|
|
|
Volume
Weighted Average Price
44
Price evolution of TNL shares traded on the BOVESPA
(Price in R$ per share and volume in R$ million)
Source:
Economática,as
of
July
7 ,
2011.
Note:
(1) Number of shares excludes treasury shares.
(2) Weighted average price for the value of common and preferred shares, calculated by
dividing total value traded by number of traded shares.
ON Shares
PN Shares
Shares Total
12-month
period
prior
to
May
23
,
2011
(inclusive)
VWAP
34.06
25.57
28.91
Number of Shares (million)
184.0
283.5
467.5
Market Capitalization (R$ million)
6,267.7
7,247.9
13,515.6
6-month
period
prior
to
May
23
,
2011
(inclusive)
VWAP
34.08
25.81
29.07
Number of Shares (million)
184.0
283.5
467.5
Market Capitalization (R$ million)
6,270.5
7,316.8
13,587.2
3-month
period
prior
to
May
23
,
2011
(inclusive)
VWAP
34.60
26.69
29.81
Number of Shares (million)
184.0
283.5
467.5
Market Capitalization (R$ million)
6,367.5
7,566.9
13,934.4
2-month
period
prior
to
May
23
,
2011
(inclusive)
VWAP
35.08
27.14
30.27
Number of Shares (million)
184.0
283.5
467.5
Market Capitalization (R$ million)
6,455.7
7,692.4
14,148.1
1-month
period
prior
to
May
23
,
2011
(inclusive)
VWAP
32.91
26.45
28.99
Number of Shares (million)
184.0
283.5
467.5
Market Capitalization (R$ million)
6,055.8
7,496.9
13,552.7
rd
rd
rd
rd
rd
th
|
|
|
|
SECTION 6.A
TMAR Valuation
Discounted Cash Flow
|
|
|
|
General
Considerations on the Valuation
BTG Pactual evaluated TMAR based on the discounted
cash flow to firm ("FCFF") methodology
Valuation Methodology
Unlevered cash flow method
-
Projection of unlevered cash flows
-
Cash flows are discounted by company’s weighted average cost of capital (WACC),
when calculating its present value
Information Sources
BTG Pactual used, for the purposes of the valuation, the operating and financial
projections provided and / or discussed with TMAR’s management
team, in R$
nominal terms
Currency
Projection in R$, in nominal terms
The unlevered cash flow is converted yearly into US$ before it is discounted
Discounted cash flow
Reference
date:
December
31 ,
2010;
cash
flows
are
discounted
to
present
value
as
of
December
31
,
2010
Projections horizon: 2011 to 2020
Assumes cash flows are generated over the year (“mid-year
convention”)
Discounted cash flows are in US$, in nominal terms
47
st
st
|
|
|
|
48
Main Assumptions
Note:
1
Costs herein contemplated were projected without considering depreciation and
amortization expenses.
2
Estimated
based
on
the
free
cash
flow
of
the
last
projection
year,
increased
by
the
growth
expectancy,
using
the
Constant
Growth
Model
or
Gordon
Model
as
per
the
equation
demonstrated in Appendix E.
3
Long-term equity market risk premium estimated on historical basis. Source: 2010
Ibbotson report.
Macroeconomic
Banco
Central’s
Focus
report
dated
July
16
,
2011
and
Economist
Intelligence
Unit
dated
July
16
,
2011
Revenue growth
Growth in 2011 based on projected volume growth from current customers and attracting
new customers and services that are in the
company's commercial pipeline
Revenues between 2012 and 2020 were estimated based on expected market growth for each
business, with emphasis on the growth of
mobile and broadband and decrease in
number of fixed lines
Operating costs
and
expenses
(1)
Estimate of slightly lower EBITDA margin in 2011 and 2012, mainly due to greater
reduction of revenues from fixed telephony compared to the
increase in revenues
from the mobile segment
From 2012 onwards, an improvement on margin is expected
due to initiatives to gain customers in mobile and broadband segments
Capex
Capex projections based on historical investment as percentage of net revenue
In 2011 and 2012, additional capex expected to be directed to the technology platform
needed to reach a greater number of customers in the
segment of mobile
telephony and broadband
Working capital
Based on historical days receivable and payable
Discount rate
Calculated
based
on:
(i)
average
de-levered
beta
of
Telecom
companies
in
Brazil,
(ii)
target
capital
structure
based
on
sector’s
average
leverage
levels,
(iii)
country
risk
and
(iv)
equity
market
risk
premium
(3)
Terminal value
Gordon perpetuity growth model
(2)
, in 2020
Assumes perpetuity growth rate ranges from 1.5% to 3.5% in US$ nominal terms
BTG Pactual considered, for purposes of the valuation analysis, operating and financial
estimates supplied and/or discussed
with Oi’s management team
th
th
|
|
|
|
Operating and Financial Summary Projections
Net
Revenues
and
Consolidated
Clients
Base
(1)
49
Client Base (Million)
Net Revenue (R$ million)
Note:
1) Consolidated 100% of Brasil Telecom users and includes regions 1, 2 and 3.
CAGR (2011E-2020E): 2.51%
Mobile Users
Lines in Service
Broadband Users
29,026
28,992
28,886
29,042
29,587
30,640
31,658
32,801
34,438
36,277
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
|
|
|
|
9,078
9,078
9,298
9,430
9,627
10,200
10,512
11,027
11,624
12,588
31.3%
31.3%
32.2%
32.5%
32.5%
33.3%
33.2%
33.6%
33.8%
34.7%
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
19,948
19,913
19,588
19,612
19,960
20,440
21,145
21,775
22,813
23,689
68.7%
68.7%
67.8%
67.5%
67.5%
66.7%
66.8%
66.4%
66.2%
65.3%
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
Operating and Financial Summary Projections
Operating Expenses and EBITDA
50
Operating Expenses (R$ million) and % of Net Revenues
EBITDA (R$ million) and EBITDA Margin
CAGR (2011E-2020E): 2.0%
CAGR (2011E-2020E): 3.56%
|
|
|
|
2,603
2,917
3,218
3,512
3,803
4,086
4,373
4,659
4,952
5,255
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
4,505
4,706
4,528
4,410
4,355
4,251
4,302
4,283
4,405
4,548
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
Operating and Financial Summary Projections
Capex and Depreciation
51
Capex (R$ million)
Depreciation and Amortization (R$ million)
CAGR (2011E-2020E): 8.17%
CAGR (2011E-2020E): 0.45%
|
|
|
|
Valuation
Discounted Cash Flow
Economic Value based on the Discounted Cash Flow to Firm Methodology
Free Cash Flow to Firm (R$ million, except otherwise indicated)
The economic value of TMAR shares calculated based on the discounted cash flow
methodology, assuming a WACC of 9.86% and perpetuity
growth of 2.5% in US$ and
nominal terms is R$77.06 per share
WACC
52
77.06
9.0%
9.5%
10.0%
10.5%
11.0%
1.5%
82.05
74.12
67.14
60.95
55.43
2.0%
87.09
78.36
70.74
64.03
58.08
2.5%
92.90
83.21
74.82
67.50
61.05
3.0%
99.69
88.81
79.49
71.43
64.38
3.5%
107.71
95.33
84.87
75.91
68.16
Source: Company, financial statements as of 03/31/2011 and BTG Pactual
NPV of Free Cash Flow to Firm (US$mm)
27,359
NPV of Free Cash Flow to Firm (R$mm)
43,774
BRT Enterprise Value
9,757
(-) BRT Minorities
(4,949)
TMAR Enterprise Value ex-BRT minorities
38,826
(-) Net Debt - Mar/2011
(13,958)
(+) BRT minorities Net Cash - Mar/2011
659
(+) NPV of Accumulated Losses
374
(+) NPV of Fiscal benefit from BRT acquisition goodwill
611
Equity Value (R$ mm)
26,511.9
# of shares
344
Value per share (R$)
77.06
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
Operational Profit (EBIT)
6,475
6,162
6,079
5,918
5,825
6,114
6,139
6,368
6,672
7,332
(-) Taxes
(2,202)
(2,095)
(2,067)
(2,012)
(1,980)
(2,079)
(2,087)
(2,165)
(2,269)
(2,493)
Net Operating Profit After Taxes (NOPAT)
4,274
4,067
4,012
3,906
3,844
4,035
4,052
4,203
4,404
4,839
(+) Depreciation / Amortisation
2,603
2,917
3,218
3,512
3,803
4,086
4,373
4,659
4,952
5,255
(-) Change in Working Capital
250
(1)
(50)
(26)
(32)
(103)
(47)
(88)
(96)
(171)
(-) Capex
(4,505)
(4,706)
(4,528)
(4,410)
(4,355)
(4,251)
(4,302)
(4,283)
(4,405)
(4,548)
Free Cash Flow to Firm (R$ mm)
2,621
2,277
2,653
2,982
3,260
3,767
4,076
4,490
4,855
5,375
Free Cash Flow to Firm (US$ mm)
1,638
1,371
1,533
1,666
1,791
2,038
2,160
2,332
2,470
2,680
|
|
|
|
SECTION 6.B
TMAR Valuation
Book Value of Shareholders' Equity
|
|
|
|
Book
Value of Shareholders' Equity
54
TMAR price per share is R$59.35, based on the Book Value of Shareholders' Equity,
excluding minority interest
Source: CVM and Company.
Note:
1
Excludes treasury shares
78,361
51,966
5,976
20,419
344
R$/share
59.35
Total Assets
(-) Total liabilities
(-) Minority interest
= Shareholders' Equity
Number of shares (million)
(1)
Book
Value
of
Shareholders'
Equity
-
TMAR
As
of
March
31
st
,
2011
(R$ million, except otherwise indicated)
|
|
|
|
SECTION 6.C
TMAR Valuation
Volume Weighted Average Price
|
|
|
|
Volume
Weighted Average Price
VWAP
(period before
05
-
23
-
2011)
:
12-month:
R$58.64
6-month:
R$58.20
3-month:
R$70.35
2-month:
R$70.59
1-month:
R$72.80
ON Shares (TMAR3)
PN Shares (TMAR5)
VWAP
(period before 05
-
23
-
2011)
:
12-month:
R$48.86
6-month:
R$50.75
3-month:
R$53.74
2-month:
R$55.83
1-month:
R$54.97
56
Price evolution of TMAR shares traded on the BOVESPA
(Price in R$ per share and volume in R$ million)
Source:
CVM and Economática,
as of July 7th, 2011.
Note: number of shares excludes treasury shares.
VWAP: R$58.74
(Since
January
5
th
,
2009)
VWAP: R$52.95
(Since
January
5
th
,2009)
0
1
2
3
4
5
6
7
0
10
20
30
40
50
60
70
80
90
05/01/2009
05/10/2009
05/07/2010
05/04/2011
Volume (R$ million)
Price (R$ / share)
0
10
20
30
40
50
60
0
10
20
30
40
50
60
70
80
05/01/2009
05/10/2009
05/07/2010
05/04/2011
Volume (R$ million)
Price (R$ / share)
|
|
|
|
57
Volume Weighted Average Price
Price evolution of TMAR shares traded on the BOVESPA
Source:
Economática, as
of
July
7 ,
2011.
Note:
(1) Number of shares excludes treasury shares.
(2) Weighted average price for the value of common and preferred shares, calculated by
dividing total value traded by number of traded shares.
ON Shares
PN Shares
Shares Total
12-month period prior to May 23
rd
, 2011 (inclusive)
VWAP
58.64
48.86
53.25
Number of Shares (million)
154.0
189.0
343.0
Market Capitalization (R$ million)
9,032.6
9,232.9
18,265.5
6-month period prior to May 23
rd
, 2011 (inclusive)
VWAP
58.20
50.75
54.10
Number of Shares (million)
154.0
189.0
343.0
Market Capitalization (R$ million)
8,964.9
9,589.6
18,554.5
3-month period prior to May 23
rd
, 2011 (inclusive)
VWAP
70.35
53.74
61.20
Number of Shares (million)
154.0
189.0
343.0
Market Capitalization (R$ million)
10,835.5
10,155.4
20,991.0
2-month period prior to May 23
rd
, 2011 (inclusive)
VWAP
70.59
55.83
62.46
Number of Shares (million)
154.0
189.0
343.0
Market Capitalization (R$ million)
10,873.6
10,550.5
21,424.1
1-month period prior to May 23
rd
, 2011 (inclusive)
VWAP
72.80
54.97
62.98
Number of Shares (million)
154.0
189.0
343.0
Market Capitalization (R$ million)
11,214.0
10,387.3
21,601.4
th
|
|
|
|
SECTION 7.A
BRT Valuation
Discounted Cash Flow
|
|
|
|
General
Considerations on the Valuation
BTG Pactual evaluated BRT based on the discounted
cash flow to firm ("FCFF") methodology
Valuation Methodology
Unlevered cash flow method
-
Projection of unlevered cash flows
-
Cash flows are discounted by company’s weighted average cost of capital (WACC),
when calculating its present value
Information Sources
BTG Pactual used, for the purposes of the valuation, the operating and financial
projections provided and / or discussed with BRT’s management
team, in R$
nominal terms
Currency
Projection in R$, in nominal terms
The unlevered cash flow is converted yearly into US$ before it is discounted
Discounted cash flow
Reference
date:
December
31 ,
2010;
cash
flows
are
discounted
to
present
value
to
December
31 ,
2010
Projections horizon: 2011 to 2020
Assumes cash flows are generated over the year (“mid-year
convention”)
Discounted cash flows are in US$, in nominal terms
60
st
st
|
|
|
|
61
Main Assumptions
Note:
1
Costs herein contemplated were projected without considering depreciation and
amortization expenses.
2
Estimated
based
on
the
free
cash
flow
of
the
last
projection
year,
increased
by
the
growth
expectancy,
using
the
Constant
Growth
Model
or
Gordon
Model
as
per
the
equation
demonstrated in Appendix E.
3
Long-term equity market risk premium estimated on historical basis. Source: 2010
Ibbotson report.
Macroeconomic
Banco
Central’s
Focus
report
dated
July
16 ,
2011
and
Economist
Intelligence
Unit
dated
July
16 , 2011
Revenue growth
Growth in 2011 based on projected volume growth from current customers and attracting
new customers and services that are in the
company's commercial pipeline
Revenues between 2012 and 2020 were estimated based on expected market growth for each
business, with emphasis on the growth of
mobile and broadband and decrease in
number of fixed lines
Operating costs
and
expenses
Estimate of slightly lower EBITDA margin in 2011 and 2012, mainly due to greater
reduction of revenues from fixed telephony compared to the
increase in revenues
from the mobile segment
From 2015 onwards, an improvement on margin is expected
due to initiatives to gain customers in mobile and broadband segments
Capex
Capex projections based on historical investment as percentage of net revenue
In 2012 and 2013, additional capex directed to the technology platform needed to reach
a greater number of customers in the segment of mobile
telephony and
broadband
Working capital
Based on historical days receivable and payable
Discount rate
Calculated based on: (i) Telecom companies average de-levered beta, (ii) target
capital structure based on sector’s average leverage levels ,
(iii)
country risk and (iv) equity market risk premium
Terminal value
Gordon perpetuity growth model
(2)
, in 2020
Assumes perpetuity growth rate ranges from 1.5% to 3.5% in US$ nominal terms
BTG Pactual considered, for purposes of the valuation analysis, operating and financial
estimates supplied and/or discussed
with Oi’s management team
(3)
(1)
th
th
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|
9,828
9,634
9,302
9,128
9,143
9,232
9,401
9,632
9,930
10,261
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
62
CAGR (2011E-2020E): 0.48%
8.5
9.8
10.8
2011E
2012E
2013E
6.8
6.4
6.1
2011E
2012E
2013E
2.1
2.4
2.6
2011E
2012E
2013E
Operating and Financial Summary Projections
Net Revenues and Consolidated Clients Base
Client Base (Million)
Net Revenue (R$ million)
Mobile Users
Lines in Service
Broadband Users
|
|
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|
63
CAGR (2011E-2020E): 0.10%
CAGR (2011E-2020E): 1.32%
Operating and Financial Summary Projections
Operating Expenses and EBITDA
Operating Expenses (R$ million) and % of Net Revenues
EBITDA (R$ million) and EBITDA Margin
2,934
2,722
2,628
2,528
2,604
2,760
2,819
2,944
3,091
3,303
29.9%
28.3%
28.2%
27.7%
28.5%
29.9%
30.0%
30.6%
31.1%
32.2%
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
6,893
6,912
6,674
6,600
6,538
6,471
6,582
6,688
6,839
6,958
70.1%
71.7%
71.8%
72.3%
71.5%
70.1%
70.0%
69.4%
68.9%
67.8%
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
|
|
|
|
64
1,356
1,609
1,591
1,543
1,554
1,468
1,438
1,387
1,390
1,426
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
622
729
835
938
1,042
1,140
1,236
1,328
1,421
1,516
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
CAGR (2011E-2020E): 0.56%
CAGR (2011E-2020E): 10.40%
Operating and Financial Summary Projections
Capex and Depreciation
Capex (R$ million)
Depreciation and Amortization (R$ million)
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|
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WACC
65
18.30
9.0%
9.5%
10.0%
10.5%
11.0%
1.5%
19.09
17.87
16.80
15.84
14.99
2.0%
19.85
18.51
17.34
16.31
15.39
2.5%
20.73
19.25
17.96
16.84
15.84
3.0%
21.76
20.10
18.67
17.43
16.35
3.5%
22.98
21.09
19.48
18.11
16.92
BRTO share price sensitivity adjusted for the distribution of redeemable shares
Valuation
Discounted Cash Flow
Economic Value based on the Discounted Cash Flow to Firm Methodology
Free Cash Flow to Firm (R$ million, except otherwise indicated)
The economic value of BRT shares calculated based on the discounted cash flow
methodology, assuming a WACC of 9.86% and perpetuity growth
of 2.5% in US$ and
nominal terms is R$18.30 per share, already adjusted for the distribution of redeemable shares of BRT in the amount of R$2.5433
per share
Source: Company, financial statements as of 03/31/2011 and BTG Pactual
NPV of FCFF - projected period (US$ mm)
2,591
NPV of FCFF - perpetuity (US$ mm)
3,507
NPV of Free Cash Flow to Firm (US$mm)
6,098
NPV of Free Cash Flow to Firm (R$mm)
9,757
(+) Net Cash - Mar/2011
1,299
(+) NPV of Fiscal benefit from BRT acquisition goodwill
1,239
Equity Value (R$ mm)
12,295.2
# of shares
590
Value per share (R$)
20.85
Value per share after redeemable shares (R$)
18.30
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
Operational Profit (EBIT)
2,312
1,993
1,792
1,590
1,563
1,621
1,584
1,616
1,670
1,787
(-) Taxes
(786)
(678)
(609)
(540)
(531)
(551)
(538)
(550)
(568)
(608)
Net Operating Profit After Taxes (NOPAT)
1,526
1,315
1,183
1,049
1,031
1,070
1,045
1,067
1,102
1,179
(+) Depreciation / Amortisation
622
729
835
938
1,042
1,140
1,236
1,328
1,421
1,516
(-) Change in Working Capital
130
44
3
15
(20)
(36)
(4)
(18)
(20)
(35)
(-) Capex
(1,356)
(1,609)
(1,591)
(1,543)
(1,554)
(1,468)
(1,438)
(1,387)
(1,390)
(1,426)
Free Cash Flow to Firm (R$ mm)
922
480
431
460
499
706
838
990
1,113
1,234
Free Cash Flow to Firm (US$ mm)
576
289
249
257
274
382
444
514
567
615
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SECTION 7.B
BRT Valuation
Book Value of Shareholders' Equity
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|
67
Book Value of Shareholders' Equity
BRT price per share is R$19.38, based on the Book Value of Shareholders' Equity, excluding
minority interest
Source: CVM and Company.
Note:
1
Excludes treasury shares
Book
Value
of
Shareholders'
Equity
-
BRT
As
of
March
31
st
,
2011
(R$ million, except otherwise indicated)
26,811
15,381
0
11,430
590
R$/share
19.38
Total Assets
(-) Total liabilities
(-) Minority interest
= Shareholders' Equity
Number of shares (million)
(1)
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SECTION 7.C
BRT Valuation
Volume Weighted Average Price
|
|
|
|
Volume
Weighted Average Price
VWAP
(period before
05
-
23
-
2011)
:
12-month:
R$15.67
6-month:
R$15.99
3-month:
R$17.00
2-month:
R$17.25
1-month:
R$16.78
ON Shares (BRTO3)
PN Shares (BRTO4)
VWAP
(period before 05
-
23
-
2011)
:
12-month:
R$12.10
6-month:
R$13.03
3-month:
R$14.23
2-month:
R$14.82
1-month:
R$15.03
69
Price evolution of Brasil Telecom shares traded on the BOVESPA
(Price in R$ per share and volume in R$ million)
Source:
CVM and Economática, as of July 7th, 2011.
Note: number of shares excludes treasury shares.
0
10
20
30
40
50
60
70
80
90
0
2
4
6
8
10
12
14
16
18
20
05/01/2009
05/10/2009
05/07/2010
05/04/2011
VWAP: R$13,40
Since January 5
th
, 2009)
0
5
10
15
20
25
30
35
40
45
50
0
10
20
30
40
50
60
70
05/01/2009
05/10/2009
05/07/2010
05/04/2011
Volume (R$ million)
Price (R$ / share)
VWAP: R$22,14
(Since January 5
th
, 2009)
Volume (R$ million)
Price (R$ / share)
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|
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70
Volume Weighted Average Price
Price
evolution
of
Brasil
Telecom
shares
traded
on
the
BOVESPA
Source:
Economática,
as
of
July
7
th
,
2011.
Note:
(1) Number of shares excludes treasury shares.
(2) Weighted average price for the value of common and preferred shares, calculated by
dividing total value traded by number of traded shares.
ON Shares
PN Shares
Shares Total
VWAP
15.67
12.10
13.33
Number of Shares (million)
203.4
386.4
589.8
Market Capitalization (R$ million)
3,188.0
4,676.2
7,864.1
VWAP
15.99
13.03
14.05
Number of Shares (million)
203.4
386.4
589.8
Market Capitalization (R$ million)
3,253.5
5,032.9
8,286.4
VWAP
17.00
14.23
15.19
Number of Shares (million)
203.4
386.4
589.8
Market Capitalization (R$ million)
3,458.3
5,498.2
8,956.5
VWAP
17.25
14.82
15.66
Number of Shares (million)
203.4
386.4
589.8
Market Capitalization (R$ million)
3,509.2
5,727.2
9,236.4
VWAP
16.78
14.89
15.54
Number of Shares (million)
203.4
386.4
589.8
Market Capitalization (R$ million)
3,412.8
5,751.4
9,164.2
12-month
period
prior
to
May
23
, 2011
(including)
6-month
period
prior
to
May
23 , 2011
(including)
3-month
period
prior
to
May
23 , 2011
(including)
2-month
period
prior
to
May
23 , 2011
(including)
1-month
period
prior
to
May
23 , 2011
(including)
rd
rd
rd
rd
rd
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|
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Condition Precedent to the Corporate Reorganization
APPENDIX A
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Condition Precedent to the Corporate Reorganization
72
Source: Material Fact published on May 24th, 2011
Exchange
of
non-voting
shares
for
voting
shares
Share
exchange
between
TmarPart
and
its
shareholders
According to the Material Fact, “TmarPart and its direct and indirect shareholders
will take the necessary actions to maintain the
shareholding control and comply
with such obligations, which may include the exchange of preferred shares held by TmarPart for
common shares held by its direct and indirect shareholders “.
According to the Material Fact published on May 24, 2011, the maintenance of control of Oi
exclusively by
TmarPart is a condition for approval of the Reorganization, in
order to comply with its legal and regulatory
obligations towards the National
Telecommunications Agency – ANATEL. With this purpose, we understand
that
mathematical adjustments will be proposed by TmarPart, with no effect to the exchange ratios analysis
presented.
In order to comply with the legal limit for the division of share capital
between common and preferred shares (i.e. a minimum of
1/3 common shares and a maximum of 2/3 preferred shares), holders of preferred shares
of TNL and TMAR are expected to
receive in exchange both common shares and
preferred shares of Oi S.A. (BRTO).
The number of common and preferred shares will depend on the capital structures of the
companies at the time of the mergers
and the final exchange ratios.
We understand that such adjustment will be
purely mathematical
and should
not affect our analysis, if made according to the
proposed valuations.
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|
Historical Stock Prices Moving Average
APPENDIX B
|
|
|
|
Exchange
Ratios based on Moving Average
Volume Weighted Average Price (moving average of
previous 3 months)
TNLP3/BRTO3
TNLP4/BRTO4
TNLP4/BRTO3
Source: Economática. Periods ended on May 23rd, 2011
Notes:
1
Moving
average
period
refers
to
historical
prices
in
the
period
between
March
24
th
,
2010
until
May
23
rd
,
2011,
used
to
calculate
the
exchange
ratios
based
on
3-month
moving
average
2
Price
of
BRT
shares
are
already
adjusted
for
the
distribution
of
redeemable
shares
of
BRT
in
the
amount
of
R$2.5433
per
share,
for
all
points
of
the
series
TNLP3
BRTO3
TNLP4
BRTO4
TNLP4
BRTO3
Exchange Ratios
2,68
2.6304
2.7308
1.9883
2,1772
1.8420
Average Selected Period
Average
2.3794
74
35.0
33.8
32.2
31.6
31.8
32.7
33.4
34.1
35.2
34.6
13.0
12.3
11.9
11.9
11.7
12.0
12.4
13.5
14.4
14.5
26.5
25.4
24.7
24.1
24.2
24.6
24.8
25.4
26.5
26.8
8.4
8.2
8.2
8.6
8.8
9.1
9.3
10.0
11.1
11.8
26.5
25.4
24.7
24.1
24.2
24.6
24.8
25.4
26.5
26.8
13.0
12.3
11.9
11.9
11.7
12.0
12.4
13.5
14.4
14.5
2.68
2.76
2.70
2.66
2.72
2.74
2.70
2.52
2.44
2.38
3.15
3.08
3.01
2.79
2.75
2.69
2.66
2.53
2.39
2.26
2.03
2.07
2.07
2.03
2.07
2.05
2.00
1.88
1.84
1.85
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|
|
|
Exchange
Ratios based on Moving Average
TMAR3/BRTO3
TMAR5/BRTO4
TMAR5/BRTO3
Volume Weighted Average Price (moving average of previous 3 months)
Exchange Ratios
TMAR3
BRTO3
TMAR5
BRTO4
TMAR5
BRTO3
4.42
4.7456
5.1523
3.6318
4.7954
4.044
3.7594
75
Average Selected Period
Average
Source: Economática. Periods ended on May 23rd, 2011
Notes:
1
Moving
average
period
refers
to
historical
prices
in
the
period
between
March
24
th
,
2010
until
May
23
rd
,
2011,
used
to
calculate
the
exchange
ratios
based
on
3-month
moving
average
2
Price
of
BRT
shares
are
already
adjusted
for
the
distribution
of
redeemable
shares
of
BRT
in
the
amount
of
R$2.5433
per
share,
for
all
points
of
the
series
60.7
58.9
58.6
58.3
58.6
57.1
57.0
56.6
68.6
70.4
13.0
12.3
11.9
11.9
11.7
12.0
12.4
13.5
14.4
14.5
47.6
46.0
45.4
45.6
45.7
46.6
47.3
48.5
52.1
54.2
8.4
8.2
8.2
8.6
8.8
9.1
9.3
10.0
11.1
11.8
47.6
46.0
45.4
45.6
45.7
46.6
47.3
48.5
52.1
54.2
13.0
12.3
11.9
11.9
11.7
12.0
12.4
13.5
14.4
14.5
4.65
4.80
4.92
4.90
5.02
4.77
4.60
4.18
4.75
4.85
5.65
5.58
5.53
5.28
5.20
5.10
5.07
4.84
4.70
4.58
3.65
3.75
3.81
3.84
3.91
3.89
3.82
3.59
3.62
3.73
|
|
|
|
Companies’
Weighted Average Cost of Capital (WACC)
APPENDIX C
|
|
|
|
Notes:
1.
Risk Free Rate calculated as of U.S. GT10 Bond
2.
Long term Equity Risk Premium, calculated by Ibbotson
3.
BTGP estimate
4.
Source: Bloomberg, on July 28, 2011.
5.
Levering Factor: 1+ (1-tax rate) x (Debt/Total Capital).
77
Companies’
Weighted Average Cost of Capital (WACC)
6.
Unlevered Beta: Beta / Levering Factor.
7.
Total Capital = Debt + Equity.
8.
Levered Beta: Beta x Levering Factor.
9.
Cost
of
Equity:
Rf
+
B
x
(Rm
-
Rf).
Debt /
Leverage
Tax
Unlevered
Comparable Companies
Beta (B)
Equity
Factor
Rate
Beta
Tele Norte Leste Participacoes S.A.
0.821
92.9%
1.61
34.0%
0.51
Telemar Norte Leste S.A.
0.877
72.5%
1.48
34.0%
0.59
Brasil Telecom
0.880
(15.6%)
0.90
34.0%
0.98
Telesp
0.502
0.4%
1.00
34.0%
0.50
TIM
0.951
8.5%
1.06
34.0%
0.90
Average
0.81
31.7%
0.70
Debt/
Debt/
Average
Lev.
Lev.
Equity
Debt/
Total Capital
Equity
Beta Lev.
Factor
Beta
(8)
Cost
(9)
Equity
20.0%
25.0%
0.70
1.17
0.81
10.7%
20.0%
25.0%
33.3%
0.70
1.22
0.85
11.0%
25.0%
30.0%
42.9%
0.70
1.28
0.89
11.3%
30.0%
35.0%
53.8%
0.70
1.36
0.94
11.6%
35.0%
40.0%
66.7%
0.70
1.44
1.00
12.0%
40.0%
45.0%
81.8%
0.70
1.54
1.07
12.5%
45.0%
50.0%
100.0%
0.70
1.66
1.16
13.1%
50.0%
Assumptions
Tax Rate -
Brazil
34.00%
Risk
Free
Rate
(U.S.)
(R)
(1)
3.29%
Stock
Market
Risk
Premium
(R)
(2)
6.72%
Country
Risk
Premium
(CRP)
(3)
2.00%
Weighted Average Cost of Capital (WACC)
9.7%
9.8%
9.9%
9.9%
10.0%
9.7%
9.7%
9.8%
9.9%
10.0%
9.6%
9.7%
9.8%
9.9%
10.0%
9.5%
9.6%
9.8%
9.9%
10.0%
9.5%
9.6%
9.7%
9.9%
10.0%
9.4%
9.5%
9.7%
9.8%
10.0%
9.3%
9.5%
9.7%
9.8%
10.0%
Cost
of
Debt
Before
Taxes
(R$):
11.0%
11.5%
12.0%
12.5%
13.0%
13.5%
Cost
of
Debt
Before
Taxes
(US$):
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
10.0%
10.1%
10.1%
10.1%
10.1%
10.1%
10.2%
Cost
of
Debt
After
Taxes
(US$):
5.6%
5.9%
6.3%
6.6%
6.9%
7.3%
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|
|
|
Exchange
Ratios Scenarios Comparison
APPENDIX D
|
|
|
|
Exchange
Ratios Scenarios Comparison
79
Detailed calculation of the Exchange Ratios and sensitivity analysis:
Source: Economática, Facset, CVM and BTG Pactual
Note: (1) From 03/29/2011 unitl 05/23/2011
(2) Number of shares as of March 31st 2011
(3) Period before 05/23/2011
(4) Considers WACC between 8.5% and 10.5%
(5) Considers perpetuity growth between 1.5% and 3.5%
Min
Max
Min
Max
Min
Max
Methodologies
TNLP4
TNLP3
BRTO4
BRTO3
TNLP4
TNLP3
BRTO4
BRTO3
TNL
BRT
TNL
BRT
Selected Period
(1)
27.13
35.04
12.46
14.73
27.13
35.04
12.46
14.73
2.18
2.18
2.38
2.38
1.84
1.84
14,137
7,809
14,137
7,809
Book Value
(2)
28.87
28.87
19.38
19.38
28.87
28.87
19.38
19.38
1.49
1.49
1.49
1.49
1.49
1.49
13,496
11,430
13,496
11,430
12-month Period
(3)
25.57
34.06
9.56
13.13
25.57
34.06
9.56
13.13
2.67
2.67
2.59
2.59
1.95
1.95
13,516
6,364
13,516
6,364
2-month Period
(3)
27.14
35.08
12.28
14.71
27.14
35.08
12.28
14.71
2.21
2.21
2.39
2.39
1.85
1.85
14,148
7,736
14,148
7,736
DCF (WACC)
(4)
32.11
32.11
16.84
16.84
51.08
51.08
22.47
22.47
1.91
2.27
1.91
2.27
1.91
2.27
15,013
9,929
23,877
13,251
DCF (Perp. Growth)
(5)
32.89
32.89
17.08
17.08
42.51
42.51
19.91
19.91
1.93
2.14
1.93
2.14
1.93
2.14
15,377
10,076
19,873
11,741
Minimum Price
Maximum Price
Exchange Ratio
Exchange Ratio
Exchange Ratio
(R$/share)
(R$/share)
(R$ mm)
(R$ mm)
TNLP4:BRTO4
TNLP3:BRTO3
TNLP4:BRTO3
Mkt Cap Max
Mkt Cap Min
|
|
|
|
Description of Valuation Methodologies
APPENDIX E
|
|
|
|
81
Valuation Model Structure
Method for the construction of the Free Cash Flow to Firm (FCFF)
Gross Revenue
Deductions
Net Revenue
Operating Costs
and Expenses
EBITDA
Unlevered Cash
Flow
EBITDA
(+/-) working capital
variation
(-)
CAPEX
(-)
Taxes
WACC
Present Value of
Unlevered Cash
Flows
Present Value of
Terminal Value
Perpetuity of
Unlevered Cash
Flow
Company’s Economic Value
(-)
Net debt
Present Value of Shares
(-)
Cost of
goods sold
(-)
sales and
marketing
expenses
(-)
other
expenses
Management’s operating assumptions
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WACC Calculation
WACC
was
calculated
with
the
combination
of
cost
of
equity
(K
e
)
and
cost
of
debt
(K
d
)
estimated
for
the
company
under
analysis, considering a target capital structure
K
e
was estimated by the evaluator based on the CAPM -
Capital Asset Pricing Model, adjusted for country’s risk
K
d
was estimated by the evaluator considering the credit risk and debt capital markets
current dynamics
Cost of
Equity
(K
e
)
Cost of
Debt
(K
d
)
Post-tax cost of debt
WACC
(US$, nominal
terms)
Risk premium expected for
the equity market (PR
m
)
Re-levered beta
Corporate spread
Pre-tax cost of debt
Marginal tax rate
Cost of equity
Target capital structure
Country risk premium (CPR)
U.S. risk free rate (R
f
)
Brazilian comparable bond
K
d
= Kdb * (1-
tax rate)
K
e
= R
f
+ (ß
* PRm) + CRP
WACC = D / (D + E) * Kd + E / (D + E) * Ke
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Constant Growth Model or Gordon Model
The
Constant
Growth
Model
or
Gordon
Model
was
used
when
calculating
the
perpetuity
Perpetuity =
FCF(n) x (1+g)
WACC -
g
FCF(n):
Free cash flow in the last projected year
“g”:
Constant perpetuity growth rate of cash flows during the period after
projections
WACC:
Weighted average cost of capital using company’s target capital structure
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Terms
and Definitions Used in the Report
APPENDIX F
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Terms
and Definitions Used in the Valuation Analysis
Beta:
index that measures the non-diversifiable risk of a stock. Beta measures the
relationship between the return of a stock and the market
return. Thus, the risk
premium will always be multiplied by this
coefficient, demanding a higher premium
for risk the higher is the change in
stock prices versus market return
Capex:
capital expenditures, or maintenance and/or capacity expansion investments
CAPM:
capital asset pricing model
EBIT:
earnings
before
interest
and
taxes
EBITDA:
earnings before interest, taxes, depreciation and amortization
FCFF:
free cash flow to firm
LTM:
last twelve months
NOPAT:
net
operating
profit
after
taxes
VWAP:
volume weighted average price
WACC:
weighted average cost of capital
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Additional Statements and Information
APPENDIX G
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Additional Statements and Information
This presentation (“Valuation Analysis”) was prepared by Banco BTG Pactual
S.A. (“BTG Pactual”) under the solicitation of Tele Norte Leste Participações S.A. (“TNL”), to
evaluate the shares of TNL, Telemar Norte Leste S.A. (“TMAR”), Coari
Participações S.A. (“Coari”) and Brasil Telecom S.A. (“BRT”, and, along with TNL, Coari and TMAR, the
“Oi Companies”), in the context of the proposed corporate reorganization of
the Oi Companies, as described in the Material Fact published by Telemar Participações S.A. on
May 24
th
, 2011(“Transaction”).
BTG
Pactual
states
that
the
information
presented
herein
is
updated
as
of
May
24
th
,
2011.
BTG Pactual
highlights
that
its
services
do
not
include
advisory
services
of
any
nature,
such
as
Legal
or
Accounting.
The
content
of
this
material
is
not
and
shall
not
be
considered a promise or a guarantee in relation to the past or future.
BTG
Pactual
highlights
that
the
valuation
of
the
Oi
Companies
was
made
in
a
standalone
manner,
disregarding
any
possible
impacts
related
to
the
Transaction,
and
disregarding possible positive or negative synergies created by the Transaction.
In preparing this Valuation Analysis, BTG Pactual obtained information from public
sources or from sources that to the best of BTG Pactual’s knowledge was considered reliable,
including
financial
statements
made
available
on
March
31
st
,
2011
relating
to
TNL,
TMAR
and
BRT,
which
were
audited
by
Deloitte
Touche
Tohmatsu,
the
independent
auditors
of the Companies. BTG Pactual obtained information from public sources which were
considered reliable, however BTG Pactual did not make an independent verification of
such information and of information received from the Oi Companies or from the third
parties hired by the Oi Companies. BTG Pactual does not assume responsibility for the
precision, accuracy or completeness of such information.
The Oi
Companies,
through
their
designated
professionals,
have
made
available
information
such
as
data,
projections,
assumptions
and
forecasts
related
to
the
Oi
Companies
and to markets where the Oi Companies operate, which were used in this Valuation
Analysis. The Oi Companies will be referenced in this Valuation Analysis jointly as
“Information Suppliers”.
BTG Pactual based its analysis on the information mentioned above and on discussions
with professionals of the Oi Companies and other representatives of the Oi Companies,
and BTG
Pactual
did
not
verify
independently
any
information
publicly
available
or
supplied
to
BTG
Pactual
in
the
preparation
of
this
Valuation
Analysis.
BTG
Pactual
does
not
express any opinion about the reliability of the information supplied and highlights
that any errors or changes in such information could significantly affect BTG Pactual’s analysis.
During the preparation of our work, we run analysis procedures whenever necessary.
However, we highlight that our work did not intend to be an audit of financial statements or
of any other information supplied to us by the Information Suppliers, and it cannot be
considered as such. Our work took into account the relevance of each item, and therefore
assets, rights and obligations of low relative relevance have not been the object of a
detailed analysis. BTG Pactual has not independently verified the information provided by
the Information Suppliers, who assumed full responsibility for the information supplied
to BTG Pactual.
During the preparation of the present Valuation Analysis, BTG
Pactual has adopted as an assumption, with express consent of the Information Suppliers, the reliability, accuracy,
veracity, completeness, sufficiency and integrity of all data which was prepared or
discussed, so BTG Pactual does not assume, neither has performed any physical inspection
of any assets or properties, and has not made any independent valuation of the assets
and liabilities of the Oi Companies, or their solvency, assuming as consistent the
information
used
in
the
Valuation
Analysis,
with
the
Information
Suppliers,
including
their
employees,
partners
and
representatives,
taking
responsibility
for
all
information
which
was prepared for or discussed with BTG Pactual.
87
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Additional Statements and Information (cont’d)
The data, forecast, assumptions and estimates related to the Oi Companies and their
markets used or included in this Valuation Analysis, has been based on certain groups of
accounts and a presentation layout which can be considerably different from the group of
accounts used by the Oi Companies in the preparation of their public financial
statements. This procedure was adopted in order to make the forecasts presented
consistent with the groups of accounts reported in the management financial statements
presented
to
us.
Occasional
differences
in
groups
of
accounts
do
not
have
an
impact
on
the
results
of
the
valuation.
All the
information,
estimates
and
forecasts
included
herein
are
based
on
those
used
and
presented
by
the
Information
Suppliers,
adjusted
by
BTG
Pactual
at
its
sole
discretion
regarding
the
reasonableness
of
such
adjustments
and
are
assumed
to
be
the
best
appraisal
of
Information
Suppliers
and
of
their
administration
of
the
business
evolution
of
the
Oi Companies and their markets of operation.
Except
if
otherwise
expressly
presented,
as
indicated
in
writing
in
specific
notes
or
references,
all
data,
historical
information,
market
information,
forecasts,
projections
and
assumptions,
included,
considered,
used
or
presented
in
this
Valuation
Analysis
are
those
presented
by
the
Information
Suppliers
to
BTG
Pactual.
The information
herein
contained,
relating
to
the
accounting
and
financial
position
of
the
Oi
Companies
and
their
markets,
are
those
available
on
March
31
st
,
2011.
Any
changes
in those positions can affect the results of this Valuation Analysis. BTG Pactual does
not assume any obligation of updating, reviewing or amending this Valuation Analysis, as a
result
of
disclosure
of
any
subsequent
information
after
May
24
th
,
2011
or
as
result
of
any
other
subsequent
event.
There is no guarantee that the assumptions, estimates, forecasts, partial or total
results or conclusions used or presented in this Valuation Analysis will be effectively reached or
verified, in part or in whole. The future results of the Oi Companies may be different
from the results included in the forecast, and differences may be significant, as result of
several
factors,
including,
but
not
limited
to,
changes
in
the
market
conditions.
BTG
Pactual
does
not
assume
any
responsibility
related
to
such
differences.
This
Valuation
Analysis
was
generated
according
to
the
economic
and
market
conditions,
among
others,
existing
on
the
date
of
its
preparation,
so
the
conclusion
presented
is
subject
to
variations
of
several
factors,
over
which
BTG
Pactual
does
not
have
any
control.
The
sum
of
individual
values
presented
in
the
Valuation
Analysis
can
be
different
from
the
sum
presented,
due
to
rounding.
To perform its work, BTG Pactual adopted as an assumption that all governmental and
regulatory approvals, or other approvals of any nature, or exemptions, amendments or
renegotiation of any agreements necessary to the Transaction were or will be obtained,
and no modifications are necessary to those acts that will cause any adverse impact to
the equity of the Oi Companies or will reduce the intended benefits of the
Transaction.
This
Valuation
Analysis
was
prepared
in
accordance
with
Law
6.404,
of
December
15,
1976,
and
CVM
Instruction
319,
of
December
3,
1999,
but
it
does
not
intend
to
be
the
only
reference for valuation of the Oi Companies, and therefore, the Valuation Analysis does
not contain all the information necessary for such objective, and consequently does not
represent
nor
constitute
a
proposal,
solicitation,
suggestion
or
recommendation
by
BTG
Pactual
for
the
approval
or
rejection
of
the
Transaction,
as
such
decision
is
the
sole
responsibility of the shareholders of the Oi Companies, and BTG Pactual does not assume
any responsibility for such decision by the shareholders.
The shareholders shall
make their own analysis in relation to the convenience and to the opportunity of approving the Transaction, and shall consult their own financial, tax and
legal advisors before making their own decision about the Transaction, in a independent
manner. The Valuation Analysis shall be read and interpreted according to the
restrictions
and
qualifications
previously
mentioned.
The
reader
shall
take
into
account
the
restrictions
and
characteristics
of
the
information
sources
utilized.
88
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Additional Statements and Information (cont’d)
This Valuation Analysis cannot be circulated, copied, published or used in any form,
neither can be archived, include or referenced, in whole or in part, in any document, without
a previous consent of BTG Pactual. The use of the Valuation Analysis is restricted to
the uses described on the CVM Instruction 319/99.
Valuation reports of the Oi
Companies and sectors prepared by other companies, given their autonomy, may rely on different assumptions than those used in this Valuation
Analysis and, consequently, present significantly different results.
89
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Banco
BTG Pactual S.A.
Av. Brigadeiro Faria Lima, 3729 9
floor
São Paulo, SP –
Brazil
Zip Code: 04538-133
Tel: +55 11 3383-2000
90
th
T
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